Mortgage tracks — why two loans at the same rate behave differently
Before you buy
Mortgage tracks — why two loans at the same rate behave differently
Israeli mortgages are not one loan. They are three or four loans stapled together, each with its own rate, its own linkage and its own term. The mix, not the headline rate, is what you are actually choosing.
A borrower comparing two Israeli mortgage offers at, say, 4.4% is comparing almost nothing. That figure is a weighted average across components that respond to completely different forces. One of those loans can become materially more expensive over five years while the other does not, and the difference was visible on the day of signing to anybody who read the composition rather than the average.
What a maslul actually is
A maslul, a track, is a self-contained loan inside your mortgage. It has its own principal, its own interest rate, its own linkage arrangement and its own repayment period. When you make a monthly payment you are servicing all of them at once, which is why the payment looks like a single number and behaves like several.
This matters beyond the interest arithmetic. Each track is treated separately for early repayment purposes, so a partial prepayment attracts fees track by track rather than across the loan as a whole. It also means you can restructure part of a mortgage without touching the rest.
Prime
The prime track is tied to the Bank of Israel rate plus a fixed margin of 1.5%. With the base rate at 3.5% since July 2026, prime is 5%. The bank then applies its own discount or premium to prime, so a borrower might be quoted prime minus 0.6%.
It is unlinked to the consumer price index, and it moves the moment the Bank of Israel moves. It is usually the cheapest component at the point of signing, and it carries no early-repayment discount fee, which makes it the natural place to put money you might repay early.
It is capped. Together with other variable components it may not exceed two thirds of the loan.
Fixed unlinked — the kalatz
Fixed, unlinked, for the life of the loan. The rate does not move and the principal is not adjusted for inflation. It is the only component that gives you a payment you can write down today and rely on in fifteen years.
You pay for that certainty in the rate, which is higher at the outset than prime. You also pay for it on exit: this is the track most likely to attract a discount fee if you repay early, and at a moment when rates have fallen, that fee can be substantial.
At least a third of the loan must be fixed, and in practice this is where that third usually sits.
Fixed linked to the index
Fixed rate, but the principal is adjusted for the consumer price index. The quoted rate is lower than the unlinked equivalent, which is why it looks attractive on a comparison sheet, and the difference is not a discount — it is the inflation risk you have agreed to carry.
This is the component that catches people. In a period of meaningful inflation the outstanding principal grows, and a borrower five years in can discover they owe more than they borrowed despite having paid every month. Israeli borrowers who took heavily linked mortgages before the 2022 inflation episode learned this the expensive way.
With the Bank of Israel forecasting inflation at 1.8% for 2026, the linkage looks benign. Forecasts are not a hedge.
Variable linked and variable unlinked
Variable tracks reset at defined intervals — commonly every year, or every two, three or five — against an anchor rate, and they come with exit points at each reset where you can repay without a discount fee. Those exit points have real value if there is any prospect of selling, refinancing or receiving a lump sum.
Variable linked tracks add index adjustment on top of the resetting rate, which stacks two risks in one component. They are usually the cheapest thing on the sheet at signing and the least predictable thereafter.
The mix rules, and what they are for
The Bank of Israel requires that no more than two thirds of a housing loan sit in variable-rate components, meaning at least a third must be fixed. The maximum amortisation period is thirty years, and there is a payment-to-income restriction on top.
These rules exist because borrowers systematically underweight the risk of the cheap component. Given a free choice, a large proportion of borrowers would put everything in whatever is cheapest today, which in a falling-rate environment is exactly the wrong instinct.
The rules are a floor, not a strategy. A loan that is two thirds prime and one third fixed complies fully and is still an aggressive bet on rates staying where they are.
How to choose without pretending to forecast
Nobody knows where rates or inflation go. What you can know is your own position, and that is what should drive the split.
Weight towards fixed unlinked if your income is fixed, if the payment being predictable matters more to you than it being minimal, or if a rise of a few hundred shekels a month would be a problem rather than an annoyance.
Weight towards prime if you have a realistic prospect of early repayment, because prime carries no discount fee. Money you expect to repay in three years should not be sitting in a fixed track.
Be careful with index linkage in any amount you would struggle to see grow. If you would not knowingly take an inflation-linked liability, do not take one because the headline rate was 0.4% lower.
And build in exit points deliberately. If you may sell, refinance, or receive a lump sum at a known date, structuring a variable track whose reset lands near that date can save the entire fee.
Money you expect to repay early should not sit in a fixed track. That single decision is worth more than most rate negotiations.
Reading a mortgage offer properly
- Ignore the blended rateAsk for the composition: principal, rate, linkage and term for each track separately. If a bank will not set it out that way, that is informative.
- Total the variable exposurePrime plus any variable component. Compliance with the two-thirds cap is the minimum, not a recommendation.
- Identify the linked portionEvery shekel that is index-linked is a shekel of principal that can grow. Decide whether you want that exposure at all.
- Find the exit pointsWhich tracks reset when, and whether you can repay at those points without a discount fee.
- Model a shockRun the payment with prime two points higher and inflation at 4%. If the answer is unaffordable, restructure now rather than later.
- Match tracks to plansSelling in five years? Expecting an inheritance? Put that money where the exit is cheap.
A bank's offer is built to be accepted and to be profitable, not to be optimal for you. That is not a criticism, it is what a lender is. But it means the structure you are handed is a starting position rather than a recommendation.
We do not take referral fees from lenders or brokers. If somebody recommending a particular bank or a particular structure does receive one, you are entitled to know, and you should ask.
Common questions
What is a mortgage maslul?
A track — a self-contained loan within your mortgage, with its own principal, rate, linkage and term. A typical Israeli mortgage combines three or four of them, and each is treated separately for early-repayment purposes.
What is the prime track?
A variable component tied to the Bank of Israel rate plus a 1.5% margin, with the bank's own discount or premium applied. With the base rate at 3.5% since July 2026, prime is 5%. It is unlinked to the index and carries no early-repayment discount fee.
How much of my mortgage must be fixed?
At least a third. Variable-rate components are capped at two thirds of the loan under Bank of Israel rules, and the maximum amortisation period is thirty years.
What does index-linked mean?
The outstanding principal is adjusted for the consumer price index. The quoted rate is lower than an unlinked equivalent because you are carrying inflation risk. In an inflationary period the balance can grow even while you pay every month.
Which track is cheapest?
At signing, usually a variable linked track. Over the life of the loan, that is unknowable. Cheapest-today and best-for-you are different questions, and the mix rules exist because borrowers conflate them.
What is an exit point?
A scheduled reset date on a variable track at which you can repay without a discount fee. If you expect to sell or refinance at a known time, structuring a reset near that date can eliminate the largest exit cost.
Can I change the mix later?
Yes, by refinancing, in whole or track by track. Whether it is worth doing depends on the early-repayment fees on the tracks you are leaving, which can be large precisely when rates have fallen.
Bank of Israel, Proper Conduct of Banking Business Directive 329 — variable-rate exposure capped at two thirds of the loan; maximum amortisation thirty years; payment-to-income restriction.
Bank of Israel monetary policy decision, 6 July 2026 — base rate 3.5%, prime 5%, 2026 inflation forecast 1.8%.
Central Bureau of Statistics monthly consumer price index — the index to which linked principal is adjusted.
General information, not financial, legal or tax advice. Rates, forecasts and regulatory limits change; check the current position before relying on any of it.
The financing decides the purchase more often than the property does
Most buyers spend months choosing an apartment and an afternoon choosing a mortgage structure that will cost them more than the difference between two apartments.
General market commentary, not legal, tax or investment advice, and not a recommendation to buy or sell any particular property. Figures are current at the date of publication and will be revised.
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