On a Katz the bank applies each month's change in the Madad to your outstanding balance and charges the fixed rate on the new balance. Its starting rate is lower than Kalatz because you carry the inflation risk. Katz counts as fixed under Directive 329.
Katz works well when inflation stays low and badly when it does not. In the first years the balance can stay flat or even grow, because inflation adds to the debt faster than the payments reduce it. Check your payment against a higher-inflation scenario before you choose.
The fair comparison is the Katz rate plus the inflation you expect, against the Kalatz rate. Early repayment works like Kalatz (a capitalization fee if average rates have fallen), plus an average-CPI fee if you repay between the 1st and the 15th of the month.
Example
₪500,000 in Katz at an illustrative fixed 3% over 25 years starts at about ₪2,371 a month. With 2% inflation every year the payment is about ₪2,890 after 10 years and about ₪3,890 after 25, although the rate never changed. With 2% inflation this is roughly comparable to a non-indexed rate of about 5%.