Prime is not the Bank of Israel rate
Prime (פריים) is the Bank of Israel policy rate plus 1.5 percentage points. The 1.5 is a convention used by Israeli banks, not a figure set by law. When the Bank of Israel changes its rate, Prime changes by the same amount from the date the new rate takes effect.
As of 20 October 2026 the policy rate is 3.25% (since 3 September 2026), so Prime is 4.75%. The Bank of Israel cut its rate four times in 2026: to 4.00% in January, 3.75% in May, 3.50% in July and 3.25% in September. The simulator reads the current rate from the Bank of Israel every day.
Your Prime track: Prime plus or minus your margin
The rate on a Prime track is Prime plus or minus a personal margin written into your loan agreement. The margin is usually negative (a discount), but it can be positive. Average Prime-track rates on new mortgages in August 2026, converted from Bank of Israel data into a margin against Prime:
- Banking system: about Prime − 0.71
- Leumi about −0.73, Hapoalim about −0.70, Mizrahi-Tefahot about −0.67, Discount about −0.65
- First International about −1.07 (the deepest average discount), Mercantile about −0.54
- Bank of Jerusalem about +0.84 (above Prime)
These are averages over all borrowers that month, not offers. Your own margin depends on your loan-to-value, your payment-to-income ratio, the stability of your income, the size of the loan, the rest of your mix and the competing offers you bring.
Why banks lend below their own Prime
- Prime is a reference rate, not the bank's cost of money. At Prime − 0.71 a mortgage still pays about 0.8 points above the Bank of Israel rate.
- A mortgage is secured by the home and capped at 75% of its value, so the bank's losses are low.
- A Prime track can be repaid early without a capitalization fee, so borrowers can move it to another bank easily, and banks compete for it.
Fixed non-indexed (Kalatz)
Kalatz (קל"צ, קבועה לא צמודה) keeps the same rate and the same payment for the whole term. You pay for that certainty: the rate is often higher than the starting rate on Prime or CPI-linked tracks, and repaying early can cost a capitalization fee if market rates have fallen since you borrowed.
How rate changes reach each track
When the Bank of Israel cuts or raises its rate, a Prime track's payment changes soon after. A Kalatz payment never changes. Tracks that reset every 1 to 10 years (משתנה כל X שנים) change only on their reset dates, based on government bond yields plus the bank's margin.
The rule that shapes every mix
Under Bank of Israel Directive 329, all variable-rate parts together (Prime, Matz and every track that resets every 1 to 10 years) may not exceed 66.66% of the loan. At least 33.34% must therefore be at a rate fixed for the whole term: Kalatz, Katz or the state Zakaut loan. There has been no separate Prime limit since 27 December 2020. From 1 October 2026 the limit covers all credit from the same bank secured on the same property, not only the new loan.
Building a mix
No single mix is best for everyone. A common way to think about it:
- Prime for flexibility: it follows rate cuts and can be repaid early without a capitalization fee, but the payment rises when rates rise.
- Kalatz for certainty: a payment that never changes, at a higher price.
- A reset track (for example every 5 years) as a middle ground: stable between resets, but it counts as variable.
- Keep the variable parts (Prime, Matz and reset tracks) at or below 66.66% in total.
Before choosing, test what happens if Prime rises by 2 or 3 points and whether your budget still holds. In the simulator you can change Prime and your margin and see the effect on the payment and the total cost.