The stability of Israel’s banking system is one of the key factors distinguishing it from banking systems in other countries. The Bank of Israel’s strict regulations ensure both the resilience and security of the financial sector, shaped by hard-earned lessons from the 2008 subprime mortgage crisis that shook the global economy.

To maintain stability, the Bank of Israel limits mortgage loans to 75% of a property's value for Israeli citizens, including new immigrants, purchasing their first home, with up to 50% for any further home.  Foreign buyers can not benefit from this first property concession, and can receive financing of up to 50% of the purchase price. In many developed countries, mortgage limits are much higher—for example, in the U.S., borrowers can sometimes finance up to 100% of a home’s value. These restrictions help safeguard the financial system, preventing market crashes and dangerous real estate bubbles.

Additionally, the Bank of Israel enforces strict repayment capacity requirements. Borrowers must demonstrate the ability to allocate no more than 40% of their net monthly income toward mortgage payments. If a mortgage would be financially overwhelming, the bank will not approve it. Furthermore, borrowers are required to structure their mortgage repayments across at least three different loan types. This ensures long-term financial stability, promotes ongoing communication between borrowers and banks, and includes periodic mortgage reviews. In contrast, borrowers in the UK can repay their mortgage using a single loan structure—an approach that may carry a higher level of financial risk.

Another safeguard is Israel’s mandatory mortgage life insurance. Anyone taking out a mortgage should purchase an insurance policy covering the entire loan amount. This measure minimizes the risk of foreclosure in cases where a borrower passes away. While evictions due to unpaid mortgages are common in other countries, Israel’s system prevents families from being forced out of their homes under such circumstances.

There are additional features that make Israel’s banking system stand out. For instance, Israeli bank customers can buy foreign currency directly from their accounts without needing to open a separate foreign currency account. Credit cards in Israel function as deferred debit cards, with payments deducted directly from bank accounts. Moreover, Israeli consumers can split payments into multiple installments—often without interest—an option less common in other countries.

Finally, given the uncertainty that often characterizes life in Israel, banks offer flexible deposit accounts with multiple early withdrawal options. For example, deposit plans to match the financial mindset of local customers, ensuring they have access to liquid funds when needed, even when their money is invested in long-term deposits.

Written in collaboration with Mizrahi Tefahot