Bank of Israel Holds Interest Rates at 3.25%: Implications for Property Buyers

On 21 October 2026, the Bank of Israel's Monetary Committee decided to keep the interest rate unchanged at 3.25%. In its announcement, the Bank noted that inflation over the previous twelve months stood at 1.6% in September, slightly below the midpoint of the government's target range, and that uncertainty remains high in view of geopolitical tensions.

Housing in the Bank's assessment

The decision referred directly to the housing market: home prices declined by 0.6% in July–August and by 1.8% in annual terms, while the annual increase in the housing component of the Consumer Price Index remained at 3.8% in September. The Bank also reported that the shekel depreciated by 3.1% against the US dollar since its previous decision, and appreciated by 0.3% against the euro.

Policy rate versus mortgage rates

The policy rate is the rate the Bank of Israel applies in its dealings with the banks. It is not the rate a buyer pays. Israeli mortgages are usually split into several tracks — for example prime-linked, fixed and variable, CPI-linked or unlinked — and each track is priced separately by the lender. In Israel, the prime rate is set at the Bank of Israel rate plus 1.5 percentage points, so prime-linked tracks move directly with policy decisions; fixed-rate tracks are priced differently.

Mortgage regulation also limits the share of a loan that can be prime-linked, and the final terms offered depend on the borrower, the loan-to-value ratio and the bank. Foreign residents may face different conditions.

What buyers can take from it

The Bank said that the future path of the interest rate will depend on inflation, economic activity, geopolitical uncertainty and fiscal developments. No direction is guaranteed. Buyers comparing offers should look at the full composition of the proposed mortgage and seek advice from a licensed mortgage adviser or their bank.