The average length of a mortgage in Israel has climbed to nearly 27 years over the past three years, according to an analysis of Bank of Israel data by the Mortgage Advisors Association, underscoring the growing difficulty households face in purchasing homes.
The figure excludes so-called balloon loans and contrasts with official central bank data that appears to show a shorter average mortgage term in recent years.
Longer Loans Used to Contain Monthly Payments
Under Bank of Israel rules, monthly mortgage repayments are capped as a share of household disposable income. As home prices have risen faster than wages and interest rates surged — particularly during 2022 — borrowers have increasingly extended mortgage durations to reduce monthly payments.
The trade-off is higher total interest costs over the life of the loan. In 2013, the central bank capped mortgage terms at 30 years, a limit that appeared distant at the time but is now approaching for many households.
Official Data Masked by Balloon Loans
Bank of Israel data published monthly suggests mortgage affordability has improved: the average mortgage term declined from 24 years in 2022 to 22.6 years in 2024, before edging up to 23.1 years in 2025.
However, the Mortgage Advisors Association says those figures are distorted by the growing use of balloon loans — short-term products, typically around three years, in which borrowers pay only interest during the loan period and repay the principal in a lump sum at maturity. In some cases, interest is also deferred until the end of the term.
Balloon Loan Use Surged After Rate Hikes
Before 2022, balloon loans made up a negligible share of new mortgages. Their use rose sharply after the Bank of Israel began raising interest rates in April 2022, peaking at 17.2% of new mortgages in 2024. Following regulatory intervention, the share declined to 15.1% in 2025.
While balloon loans are commonly used as bridge financing by investors or homeowners renovating properties, analysts say part of the surge was driven by developers. Contractors, facing weak demand amid high interest rates and the war, offered to subsidize interest payments on balloon loans to attract buyers.
Because balloon loans are short-term, they artificially lower the average mortgage duration in official data.
Households Near Regulatory Limit
When balloon loans are excluded, the average mortgage term rose to nearly 27 years in 2023 and has remained close to that level since, according to the association.
“This means mortgages are being stretched almost to the limit,” said Nofar Yaakov, chairwoman of the Mortgage Advisors Association, in comments to Calcalist. “The data reflects how difficult it has become for households to cope with monthly repayments.”
Yaakov added that just as contractor-subsidized loans distorted housing price data, they also skewed headline mortgage statistics, creating the impression that loan terms had shortened.
Longer Terms Carry Heavy Financial Cost
The extension of mortgage durations has significant financial implications. On a typical mortgage of 1 million shekels at a weighted interest rate of 5%, extending the loan term from 24 years to 27 years increases cumulative interest payments by roughly 100,000 shekels over the life of the loan.
That additional cost — sometimes referred to by advisers as a “spreading penalty” — can amount to around 10% of the original loan, further weighing on household finances.
Comments