Even while the cannons are still thundering in the North and Gaza amid fragile ceasefires, the credit market is already preparing for the day after; specifically, January 1, 2026, when the government’s “Swords of Iron” loan-relief framework officially ends. Then, finally, the banks will be able to return to full profitability.
Until then, any citizen who secures a loan by mortgaging their property can still receive hundreds of thousands (or even millions) of shekels at a fixed interest rate of 5.5–6%, for up to 30 years.
From January 1, 2026, the same loan will cost 8%, 9%, or even 11%, if it’s approved at all.
Here is a real example from this week: A client of ours owns an apartment worth three million shekels and already has an existing mortgage of 800,000 shekels.
Bank Leumi offered her an additional loan of 700,000 shekels at 7.5% interest.
Allows borrowers to raise credit under eased conditions
Thanks to the temporary benefit, she instead received the loan at 5.5% fixed for 30 years, a difference that reduces her monthly payment by just over 1,500 shekels, amounting to nearly half a million shekels over the life of the loan.
All of this is possible only until the end of this year.
This benefit allows borrowers to raise credit under eased conditions by using existing equity. In practice, one can realize up to 70% of the property value, after deducting the existing mortgage – at a relatively low 5.5% interest rate.
On January 1, the market reverts to Israel’s normal banking limitations: a maximum of 50% loan-to-value based on property value.
Many customers will be forced to seek financing from non-bank lenders, where interest rates exceed 7% and terms are far more conservative.
We now see tens of thousands of normative customers with urgent credit needs, many unrelated to the war.
For example, couples who signed 90/10 contracts and suddenly can’t sell their previous home due to the market freeze; business owners who need a few months of bridge financing; families who accumulated credit-card debt due to a slowdown and are now paying 13–15% interest; evacuees, reservists, mortgage-refused clients – and more.
All of them can be stabilized through a long-term, low-interest loan, but only until the end of 2025.
In early 2026, the private-customer credit crisis is expected to worsen dramatically. Tens of thousands of normative clients, who previously barely approached overdraft, will face collection procedures and enforcement actions even without doing anything “wrong.”
The banks will continue waiting patiently. Those very same customers will eventually arrive, will pay the high interest rates, and, unlike today, will have no temporary market benefit on which to rely.
It’s not because the banks misjudge risk, but because the market is limited and the banks hedge their risks as required.
If it weren’t for the publication of the “Swords of Iron” framework, and had the government and the Bank of Israel not done the bare minimum, we would still be stuck with the same real-estate freeze, and the situation would be even worse.
Yet, the war is not truly over, and real estate prices are not dropping.
This narrow window of opportunity is exactly the time for customers in liquidity distress, whether for long-term loans or for bridging, to take action before the door closes.
It will slam shut in everyone’s face.
The banks will continue to profit, and the public will continue to pay.
The writer is the CEO of Karin Finance, specializing in mortgage and non-bank credit consulting.