Bank of Israel rate cut: is it worth changing your old mortgage?

The Bank of Israel's key rate cut to 3.25% is prompting mortgage holders to consider refinancing. However, as the article warns, chasing a low rate could lead to losses due to early repayment fees. Scenarios are analyzed for a loan of 900,000 shekels: with a fully fixed rate, the penalty reaches 97,927 shekels, and the break-even point is 147 months; with a mixed structure, the penalty is lower and the benefit is higher.

The Bank of Israel's key rate cut to 3.25% is prompting many mortgage holders to consider refinancing. It seems logical to switch from a loan at 5.5% to a new one at 4.2%, but the article warns of hidden fees. The main risk is the early repayment fee, which increases when market rates fall. A calculation is provided for a mortgage with a remaining debt of 900,000 shekels. With a fully fixed rate, the penalty reaches nearly 97,927 shekels, net savings are about 71,000 shekels, and the break-even point only comes after 147 months. With a mixed structure (fixed part plus prime), the penalty drops to 45,128 shekels, the payback period shortens to 77 months, and the total net benefit exceeds 104,000 shekels. The article cautions against focusing only on the monthly payment, as the bank may extend the loan term. It is recommended to request a detailed debt calculation and consider partial refinancing.