CEO of Bank of Jerusalem: "Mortgage terms should be extended to 35 years"

"I have no doubt that once the war ends, we will enter a period of recovery and rebuilding, especially in northern Israel and near the Gaza border. The real estate and infrastructure markets will play key roles in enabling urban renewal and growth, creating unforeseen opportunities to attract quality populations to Israel’s borders and facilitate comprehensive infrastructural upgrades," announced Yair Kaplan, CEO of Bank of Jerusalem, at the bank’s annual conference celebrating 30 years of its real estate sector. The event was attended by senior figures from the real estate industry.

"We at Bank of Jerusalem have specialized in real estate for over 60 years. Today, we manage about 250 projects across Israel, financing approximately 12,000 housing units," Kaplan said. He highlighted the scope of the sector’s operations, which amounts to roughly NIS 12 billion, a significant figure even by large bank standards, thanks to the bank’s unique collaborations with most insurance companies in Israel.

To illustrate the bank’s accessible and efficient services, Kaplan emphasized the dedication and concern of its staff. He shared a story from September at the Contractors' Association conference in Eilat, where Ofer Rofa, head of the real estate sector, received calls from developers not attending the conference and provided solutions for their projects with the bank—even at 11 PM.

"We always try to think outside the box. It's no coincidence that Bank of Jerusalem was a pioneer in financing urban renewal projects in Israel, expanding its credit solutions to include mezzanine loans and equity complements—features more commonly associated with private debt funds than with banks," he said.

Kaplan also noted that many Israeli cities are expected to undergo urban renewal processes, backed by local authorities and the Israeli government. "Bank of Jerusalem places significant emphasis on this area and plans to expand its credit portfolio and market share in the field," Kaplan stated.

How to Deal with Contractor Loans?

Kaplan referred to a meeting convened by the Bank of Israel with business division heads from various banks. "The central bank expressed concerns about the risks associated with the contractors' loan model and the 20-80 payment structure, such as the inability to complete apartment purchases on time, recession scenarios that could complicate mortgage refinancing in the future, and unsold housing inventory accumulation. This financing method also raises credit needs and funding costs for developers, requiring increased attention to demand risk management and project cash flow."

Kaplan continued, "Our preliminary conclusions are that contractors offering loans should avoid financing buyers' down payments, manage non-linear sales mixes wisely within approved credit frameworks, and, of course, update us when project credit needs increase so we can prepare accordingly."

"On the other hand, there’s no doubt that non-linear sales trends also stem from genuine challenges buyers face in raising the required equity or handling heavy mortgage costs-, he pointed out. “Interest rate hikes in the past two years have increased the average monthly mortgage payment by around NIS 1,000, while home prices have risen by about 6% since the beginning of the year.

“Therefore,” Kaplan concluded, “ I have called on the Bank of Israel to extend mortgage terms from 30 to 35 years, as is common in many countries, and to increase the financing rate for purchases beyond 75%, as successfully implemented in the 'Buyer’s Price' program,".