The era of ambiguous leverage is officially over. As of February 2026, the Bank of Israel has drawn a decisive line in the sand to protect the nation’s financial integrity. New directives from the Supervisor of Banks are not merely administrative paperwork—they represent a strategic fortification of the housing market, ensuring that Israeli homeowners and the banking sector remain robust and solvent in a fluctuating global economy.
The New Rules of Engagement
- Total Debt Visibility: Lenders must now aggregate all loans secured by a single property to calculate repayment ratios, eliminating hidden leverage pockets.
- Tighter LTV Ceilings: Loan-to-Value ratios are strictly capped at 75% for primary residences and 70% for other properties, with specific limits on general-purpose loans.
- Loophole Closure: The practice of treating multiple secured loans as separate entities for regulatory testing has been abolished to prevent over-extension.
A Unified Front on Debt Calculation
The days of fragmenting debt to bypass regulatory oversight are finished. The Central Bank now mandates a holistic view of a borrower’s liabilities, ensuring that the sheer resilience of Israel’s banking sector is not compromised by hidden leverage.
Under the newly issued Circular ח‑06‑2840, the Supervisor of Banks requires lenders to aggregate every single loan secured against a property when calculating the Payment-to-Income (PTI) ratio. Previously, borrowers might have managed to secure additional funding by having loans treated in isolation. Now, taking out an additional loan on a home—whether for renovation or other needs—can push total repayments above the regulatory limit, forcing responsible lenders to refuse credit to protect the borrower from insolvency.
How Do the New LTV Ceilings Impact Investors?
Investors looking to leverage existing assets to expand their portfolios face a stiffer, more disciplined reality. The calibrated adjustments to Loan-to-Value (LTV) ratios are designed to cool speculative overheating while preserving access for genuine homebuyers building their future in Israel.
The directive consolidates LTV limits into clear tiers: up to 75% for a primary home purchase and 70% for other property purposes. Perhaps most significantly, “loans for any purpose” backed by property are now codified at a 50% LTV cap. However, reflecting a nuanced understanding of consumer needs, banks retain the discretion to extend this to 70%, provided the portion exceeding the 50% threshold does not surpass NIS 200,000. This ensures that small, necessary liquidity remains available without encouraging dangerous exposure.
Closing the Regulatory Gaps
Ambiguity is often the enemy of financial security. By codifying definitions for key metrics, the Supervisor of Banks is eliminating the gray areas that previously allowed risky lending practices to flourish under the radar.
The new framework clarifies that bridge loans, top-ups, and products similar to Home Equity Lines of Credit (HELOC) can no longer be isolated. They all contribute to the same LTV and PTI “buckets.” This change significantly reduces the “borrowing headroom” that existed under older, informal practices. By standardizing how “monthly repayment” and “net disposable income” are calculated, the Bank of Israel is ensuring that every shekel lent is backed by real, verifiable repayment ability, safeguarding the economy against the kind of bubbles seen elsewhere in the world.
| Feature | Previous Informal Practice | New 2026 Standard (Circular ח‑06‑2840) |
|---|---|---|
| Debt Aggregation | Loans often treated separately for PTI tests. | Mandatory aggregation of all loans on one property. |
| Primary Home LTV | Varied interpretation of limits. | Strictly capped at 75%. |
| General Purpose Loan | Flexible limits based on bank policy. | Capped at 50% LTV (up to 70% if excess < NIS 200k). |
| Bridge/Top-up Loans | Could sometimes bypass total cap counts. | Fully integrated into total LTV and PTI calculations. |
Navigating the New Landscape
- Audit Your Leverage: Before applying for new funds, calculate the total debt currently secured against your property to see if you hit the aggregate cap.
- Verify “Any Purpose” Limits: If seeking cash out for non-housing needs, ensure your request fits within the 50% LTV rule or the NIS 200,000 exception.
- Consult Early: Given the tighter definitions of “net disposable income,” meet with lenders early to understand exactly how your repayment ability is now measured.
Glossary
- PTI (Payment-to-Income): A ratio comparing a borrower’s monthly debt payments to their gross monthly income; a key metric for assessing repayment ability.
- LTV (Loan-to-Value): The ratio of a loan to the value of the asset purchased; a lower LTV implies more equity and less risk for the lender.
- Circular ח‑06‑2840: The specific regulatory document issued by the Bank of Israel in February 2026 outlining the new mortgage definitions and limits.
- Supervisor of Banks: The official within the Bank of Israel responsible for the stability and proper conduct of the Israeli banking system.
- Net Disposable Income: The amount of money a household has available for spending and saving after income taxes and mandatory charges have been deducted.
Methodology
This report is based on the official analysis of the Bank of Israel’s regulatory changes issued in February 2026, specifically Circular ח‑06‑2840. Interpretations regarding market impact and borrower constraints are derived from data provided by the Semerenko Group and the text of the Supervisor of Banks’ directive.
FAQ
Q: Can I still get a loan against my house for general expenses?
A: Yes, but with stricter limits. You are generally capped at 50% of the property’s value. However, the bank has the discretion to allow up to 70% LTV, provided the amount of the loan above the 50% mark does not exceed NIS 200,000.
Q: How does this affect first-time homebuyers in Israel?
A: First-time buyers purchasing a primary residence are still eligible for the highest leverage tier, allowing for up to 75% financing. The tighter rules primarily impact those seeking additional loans or leveraging existing properties for further investment.
Q: Why did the Bank of Israel introduce these specific changes now?
A: The move is a proactive measure to reinforce financial stability. By preventing households from becoming over-leveraged through multiple, non-aggregated loans, the Bank aims to keep the housing market sustainable and protect borrowers from taking on debt they cannot service in a downturn.
Q: Do my existing loans count against these new limits if I want to borrow more?
A: Absolutely. The new rules require banks to look at the total credit secured by the property. If you already have a mortgage and a bridge loan, both count toward your LTV and PTI caps, potentially reducing the amount of new credit you can access.
The Israeli Housing Market Matures
The updated regulations signal that the Israeli real estate market is maturing into a landscape of higher equity and lower systemic risk. While this raises the bar for obtaining credit, it ultimately serves to protect the wealth of Israeli homeowners. Smart money will adapt by focusing on stronger equity positions rather than relying on maximum leverage.
Strategic Takeaways
- Stability First: The Bank of Israel prioritizes long-term economic resilience over short-term credit expansion.
- End of Shadow Leverage: All debts are now visible and aggregated, removing the ability to “stack” loans invisibly.
- Equity is King: Borrowers must maintain higher equity levels, specifically for non-primary housing investments.
Why We Care
A stable housing market is the backbone of a strong national economy. By preventing dangerous over-leveraging, Israel is ensuring that its citizens’ most valuable assets—their homes—remain secure. These regulations demonstrate confidence in the market’s value and a commitment to preventing the kind of reckless lending that has destabilized other economies. For anyone living in, investing in, or supporting Israel, a robust and regulated banking sector is a sign of enduring strength.
