In an Israeli mortgage, prime (ריבית פריים) is the variable track that follows the Bank of Israel. It is not CPI-linked, it is not fixed, and it is not the same number as the central-bank rate — it sits a fixed 1.5 percentage points above it.
That single formula explains almost everything else: why the payment can jump the day after a rate decision, why banks quote the track as "P plus" or "P minus," and why the regulator used to cap how much of a mortgage could sit here.
This article explains the formula, how offers are written, when the rate moves, and works a full example with numbers.
What the prime rate is
The Bank of Israel sets a policy rate. Prime is that rate plus 1.5 percentage points. The 1.5 is not a bank margin and not a negotiation — it is the definition.
If the policy rate is 3.5%, prime is 5.0%. If the policy rate is 4.0%, prime is 5.5%. The gap never changes.
What you actually pay on a prime track is prime plus (or minus) a bank spread. The spread is the part that is negotiated. The 1.5 is not.
— Bank of IsraelThe prime rate is the Bank of Israel interest rate plus a fixed addition of 1.5 percentage points.
How banks quote it
Offers almost never print a single percentage. They print a relationship to prime:
| Quote | What it means | If prime is 6.0% |
|---|---|---|
| P − 0.5% | Half a point below prime | 5.5% |
| P (or P + 0%) | Exactly prime | 6.0% |
| P + 0.5% | Half a point above prime | 6.5% |
The spread is fixed for the life of that component. When the Bank of Israel moves, prime moves, and your rate moves by the same amount. The "− 0.5" does not get renegotiated every time.
A lower spread is a better quote, all else equal. Comparing two prime offers is comparing the spreads, not the headline P.
Pro Tip
When two banks both say "prime," they are quoting the same index and a different spread. Ask for the number after the P, in writing, on the same day.
When it moves
The Monetary Committee publishes a rate decision eight times a year. Prime moves the same day, by the same amount, in the same direction.
There is no lag built into the track. There is no annual reset. If the Bank of Israel cuts a quarter point on a Monday, a prime component priced at P + 0 is a quarter point cheaper on Tuesday.
The other common variable track — variable every five years — does the opposite: it sits still until a scheduled date, then reprices against a pre-agreed benchmark. Prime is the one that can move between those dates.
Why it isn't CPI-linked
Prime is a rate that moves. The principal is not revalued with the consumer price index.
That is the opposite of a fixed CPI-linked track (קבועה צמודה), where the rate is fixed but the balance itself grows with inflation, so the payment still moves.
Two ways for a payment to change, two different mechanisms:
Prime — the interest rate changes; the outstanding principal does not get inflated
CPI-linked — the principal is revalued with the index; the contractual rate can still be fixed
Newcomers mix them up because both produce a payment that is not constant. They are not the same risk.
The old one-third cap
As of August 2026 the composition rules are:
At least one third at a fixed rate — so at most two thirds of the loan can be variable, including prime
Prime is no longer capped on its own. There used to be a separate one-third ceiling just for prime. That extra cap was removed. Prime can now occupy the whole variable portion — up to two thirds — like any other variable component
The extra cap existed because, in the zero-rate years, whole mortgages sat on prime. When the Bank of Israel started raising, every shekel of those loans moved at once. The remaining fixed-third rule is the shock absorber that replaced it.
Individual banks can still be stricter than the regulator. The binding text is on the Bank of Israel site.
A worked example
A prime component of ₪400,000 over 25 years, quoted at P. The 6.0% used below is illustrative only — not a market quote and not a forecast. The point is the arithmetic.
| At 6.0% (P) | At 7.0% (P after +1 point) | |
|---|---|---|
| Monthly payment | ₪2,577 | ₪2,827 |
| Total interest | ₪373,162 | ₪448,135 |
| Change | — | +₪250 / month |
One percentage point on this slice is ₪250 a month — about 10% of the prime payment. The first month at 6.0% is ₪2,000 interest and ₪577 principal: 78% of payment one is the cost of borrowing.
The same +1 point on an entire ₪1,200,000 loan sitting on prime would be +₪750 a month (₪7,732 → ₪8,481). That is why the mix exists. The numbers are the same ones used in the mortgage mix article; they are here so the prime slice can be read on its own.
How it sits in a mix
Prime is usually one component among two to four, not the whole loan. A typical split puts a third or so here, with the rest in fixed non-linked (קל״צ) and sometimes a CPI-linked fixed track.
The trade is immediate:
If the Bank of Israel cuts, this is the slice that gets cheaper without refinancing
If the Bank of Israel hikes, this is the slice that gets more expensive the next day
Early repayment on prime is usually cheaper than on a fixed track, because there is no long locked-in rate to compensate the bank for
There is no universally correct share. The right amount of prime is the amount of payment volatility you can actually absorb — not the amount that looks cheapest on the day you sign.
What this calculation excludes
Every figure above is principal and interest only. It excludes taxes, mortgage and structure insurance, file-opening fees, appraisals, and other closing costs.
The 6.0% is an assumption, not a quote. Prime will not stay at one number for 25 years. A schedule built from today's rate is a snapshot; it is rebuilt every time the Bank of Israel moves.
LoanWise is a calculator. It is not a bank, not a mortgage broker, and not financial advice. The number your bank gives you will differ, and theirs is the one that counts.
Prime is one track in a mix. For how the tracks combine, see the Israeli mortgage mix. For how each payment splits between interest and principal, see the amortization schedule.
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Start Your CalculationFAQ
What is the Israeli prime rate?
The prime rate is the Bank of Israel policy rate plus a fixed 1.5 percentage points. Mortgage tracks then add or subtract a bank margin around that number.
Is prime the same as the Bank of Israel rate?
No. Prime is always 1.5 points above the Bank of Israel rate. If the central bank rate is 3.5%, prime is 5.0%.
How often does prime change?
Whenever the Bank of Israel changes its policy rate. The Monetary Committee publishes a decision eight times a year. Prime moves the same day, in the same size, in the same direction.
Can my whole mortgage sit on prime?
No. At least one third of an Israeli mortgage must be at a fixed rate, so at most two thirds can be variable — including prime. There used to be a separate one-third cap on prime; that extra cap was removed.
Does prime go down as well as up?
Yes. The track follows the central bank in both directions. A cut lowers the payment on the prime component the same way a hike raises it.
What's the difference between prime and a five-year variable?
Prime can reprice the moment the Bank of Israel moves. A five-year variable stays put until the scheduled reset, then follows a pre-agreed benchmark. Prime is more immediate; the five-year track is more delayed.
