Written and professionally reviewed by the Ailon Financing Solutions team
What is prime interest?
The prime interest rate is a banking base interest rate calculated as the Bank of Israel interest rate plus 1.5 percentage points. When the Bank of Israel interest rate is 3.5%, the prime interest rate is 5%.
In practice, the bank offers a route at a margin from the prime. For example, an offer of prime minus 0.7 percentage point means an interest rate of 4.3% when the prime is 5%.
What happens when the interest rate changes?
When the Bank of Israel changes the interest rate, the prime rate changes at the same rate. In the Spitzer route, the bank recalculates the payment on the principal balance and for the remaining period.
An increase of one percentage point does not increase the payment by one percent. The effect depends on the balance and the remaining years. The longer and larger the loan, the more significant the change in shekels.
You can check the effect using The mortgage calculator and compare the current interest rate with a two percentage point higher interest rate.
The benefits of a prime route
- The fund is not linked to the index.
- There is usually no capitalization fee for early repayment.
- You can enjoy a drop in interest without recycling.
- The route is flexible and suitable for the part that is expected to be paid off early.
The risks of a prime route
- The repayment can increase quickly when the interest rate in the economy increases.
- There is no certainty about the future payment.
- A margin that looks attractive does not eliminate the interest rate risk.
- A household that is already in a high repayment ratio may find itself under cash flow pressure after an increase.
How much of the mortgage can be taken in prime
Since 2021, the old limit that limited the prime to one third has been abolished. However, the limit on the variable interest rule remains, and at least one third of the loan must be at a fixed interest rate. That is why it is possible to reach up to two thirds with a variable interest rate, subject to the bank's policy and the mix.
The source is a message Bank of Israel on removing the prime limit and proper banking management instruction 329.
When is a prime route appropriate?
The route is usually suitable as part of a mix, especially when you want flexibility for early repayment and the household has a margin to absorb an interest rate increase. It is less suitable as a large part of the loan when the current repayment is already close to the capacity limit.
Current data and source
As of August 9, 2026, the Bank of Israel interest rate is 3.5% and the prime rate is 5%. The date of the next interest rate decision is September 1, 2026. The figure is updated on the page The Bank of Israel's monetary policy tool.
