Mortgage comparisons

Katz vs Kalatz: CPI-linked or unindexed fixed-rate track

Both keep the interest rate fixed. Kalatz is not linked to the Madad, so its payment never changes. Katz starts at a lower rate, but its balance and payment rise with inflation, so you carry the inflation risk.

CriterionKalatz (fixed, not CPI-linked)Katz (fixed, CPI-linked)
Interest rateFixed for the whole termFixed for the whole term
CPI indexationNoneThe balance follows the Madad every month
Monthly paymentThe same in the first and in the last monthRises roughly one for one with cumulative inflation
Typical rate levelUsually higher than Katz; see today's rates pageLower than Kalatz, because you carry the inflation risk; see today's rates page
Early-repayment feeCapitalization fee if average market rates have fallen (20% off after 3 years, 30% off after 5)The same capitalization fee, plus an average-CPI fee if you repay between the 1st and the 15th of the month
Main riskOverpaying if rates fall, and a fee to leaveInflation: the balance can stay flat or rise in the first years
66.66% variable-rate limitCounts as fixedCounts as fixed: CPI linkage does not make a fixed rate variable
Fair comparisonIts rate, as it isIts rate plus the inflation you expect

Which one should you choose?

Kalatz suits borrowers who want a payment that never moves and whose income may not keep up with prices. Katz suits borrowers whose income rises with inflation, who need the lower starting payment to pass the bank's payment-to-income test, and who accept an uncertain total cost.

How indexation changes what you owe

The Madad is Israel's Consumer Price Index, published monthly by the Central Bureau of Statistics. On Katz the bank applies each month's change in the index to your outstanding balance, then charges the fixed rate on the new balance. If you owe ₪1,000,000 and inflation is 2% over a year, the index adds about ₪20,000 to the balance on top of the interest. On Kalatz that ₪20,000 is not added.

In the early years each payment repays little principal, so inflation can outrun repayment: the balance may stay flat or even grow. This is often called the crocodile mouth.

Comparing them fairly

The fair comparison is the Katz rate plus the inflation you expect, against the Kalatz rate. Example from the Ribit academy (an assumption, not a forecast): ₪1,000,000 over 30 years at a fixed 3% plus CPI linkage, with 3% inflation every year. The first payment is about ₪4,216, in year 10 it is about ₪5,666, and the balance peaks at about ₪1,033,000 before falling below ₪1,000,000 after about 12 years. With 2% inflation the balance falls from the first months.

A calculator that shows one fixed payment for a CPI-linked loan understates what you will pay whenever inflation is positive. Run both tracks under several scenarios, for example 1%, 2% and 4% a year.

Who should lean which way

Indexed tracks start lower, so they lower the first payment and help with the payment-to-income test, but part of the inflation risk moves from the bank to you. Check that your income rises with prices, and what share of your whole mix is CPI-linked. Non-indexed tracks (Kalatz, Prime, non-indexed reset tracks) limit the exposure.

Frequently asked questions

Which is cheaper, Katz or Kalatz?
It depends on inflation over the life of the loan. Roughly, Katz is cheaper if average inflation turns out lower than the gap between the Kalatz rate and the Katz rate, and dearer if it is higher. Run both in the simulator with 1%, 2% and 4% inflation.
Does the Katz interest rate change with inflation?
No. The rate stays fixed. What changes is the balance: each month it is adjusted by the change in the Madad, and the interest is charged on the adjusted balance.
Is there an extra cost to repay Katz early?
Yes, one more than on Kalatz. Both can carry a capitalization fee if average rates have fallen; on Katz an average-CPI fee also applies if you repay between the 1st and the 15th of the month, so repay in the second half of the month.
Do Katz and Kalatz both count as fixed for the Bank of Israel limit?
Yes. Both count towards the minimum 33.34% fixed share under Directive 329. Only the interest rate matters for that test, not the CPI linkage.
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