Interest rate announcements from the Bank of Israel often make headlines, but many homeowners are left wondering one simple question:
“What does this mean for my mortgage?”
The answer depends entirely on which mortgage tracks (מסלולים) you have.
Some borrowers will see their monthly payment change almost immediately. Others may not notice any difference at all.
Here’s how it works.
Which Mortgage Tracks Are Affected?
Not every mortgage track responds the same way.
Prime-Linked Loans (פריים)
If part of your mortgage is linked to the prime rate, your monthly payment will move up or down when the prime rate changes. When your next payment comes due, you will already notice a change in the amount of your monthly repayment.
Adjustable-Rate Loans (משתנה)
Adjustable-rate tracks are not directly tied to the prime rate.
However, different interest rates often move in the same direction. When the prime rate falls, the market interest rates used to price adjustable-rate mortgages often fall as well, although there is not a one-to-one relationship.
The interest rate on an adjustable-rate mortgage is reset at predetermined intervals (for example, every 1, 1.5, 2, 2.5, or 5 years), depending on the track you selected when you took out the loan.
If market interest rates have fallen by your next reset date, you’ll benefit from a lower interest rate. Likewise, if rates have increased, your payment may rise.
Fixed-Rate Loans
Whatever the Bank of Israel does – raises rates, cuts rates, or leaves them unchanged – your payment on this portion of the loan remains the same.
This is worth remembering both when rates fall (you won’t see the benefit on this portion) and when they rise (you’re protected on this portion).
How Much Will Your Monthly Payment Change?
As a general rule of thumb:
For every ₪100,000 of prime-linked mortgage, a 0.25% change in the prime rate means a monthly payment change of approximately ₪11 – ₪15 per month.
The exact amount will vary based on what the prime rate is and how many years you have left in your loan.
Example: A 1 million NIS mortgage
Suppose you have the following mortgage with 25 years remaining:
- ₪400,000 in a fixed rate loan
- ₪300,000 in a prime-linked loan
- ₪300,000 in an adjustable-rate loan
If the prime rate falls by 0.25% from 5.25% to 5.00%:
- The prime portion would decrease by ₪44 per month
- The fixed portion stays exactly the same. The adjustable portion remains unchanged until its next scheduled reset.
- Total savings over the life of the loan: 13,192 NIS
Should You Refinance When the Prime Rate Falls?
Maybe. The decision rests on several factors:
- Your interest rates, and current market rates
- How long you’ve had the mortgage, and how long you have left
- Your remaining balance
- The mix of mortgage tracks
- Any refinancing costs
Sometimes refinancing can save tens or even hundreds of thousands of shekels. Other times, it offers little or no benefit. The only way to know is to run the numbers.
Frequently Asked Questions
The Prime rate changes whenever the Bank of Israel changes its benchmark interest rate. You can find the rate and learn more about Prime Rate in Israel.
Portions of your loan which are prime-linked will be affected at the very next repayment.
As a general rule, every ₪100,000 in a prime-linked mortgage changes by approximately ₪11 – ₪15 per month for every 0.25% change in the prime rate. The exact amount depends on your interest rate and the remaining term of your mortgage.
Your mortgage payoff statement has this information. If you need help reading it, you can drop me a line.
It depends on the period you’re comparing it to. Israel has gone through multiple interest-rate cycles, with the prime rate reaching both significantly lower and significantly higher levels than today. To learn more, see Prime Rate History in Israel.
The Bottom Line
When the Prime Rate changes, not every borrower experiences the same result.
- Prime-linked loans respond quickly
- Adjustable-rate loans change at their next reset date
- Fixed-rate loans remain unchanged
Understanding how your mortgage is structured is far more important than simply following the latest interest rate headlines.
Even a small change in interest rates can have a meaningful impact over the life of your mortgage.
Not sure whether your mortgage is still competitive?
I’m happy to perform a complimentary, no-obligation mortgage review. I’ll explain how your mortgage is structured, whether current interest rates create an opportunity to refinance, and whether making changes are likely to save you money.
