While the Bank of Israel has not yet adjusted its benchmark interest rate, the country’s leading commercial banks have taken the initiative by lowering mortgage rates. This preemptive move signals both confidence in an upcoming monetary easing and a desire to revive a sluggish housing market.
According to official data, the average mortgage rate fell from 5.44% in June to 5.28% in July 2025, compared with nearly 6% a year earlier. The decline spans all categories — fixed-rate loans, inflation-linked mortgages, and bond-indexed products — reflecting broad-based competition among banks to attract new borrowers.
Major lenders such as Leumi, Hapoalim, Mizrahi Tefahot, and Discount Bank are adjusting their lending policies to encourage demand while maintaining financial stability. Lower bond yields have reduced funding costs, allowing banks to pass part of the benefit on to customers through more attractive rates.
If this trend continues, analysts expect a gradual recovery in real estate activity toward the end of 2025. Combined with falling inflation and growing consumer confidence, these developments could mark the start of a new, healthier cycle for Israel’s housing market.
