Mortgage Refinancing 2026 – When to Refinance After 3 Rate Cuts
The Bank of Israel has cut rates three times in a row since the beginning of 2026 — the base rate has dropped to 3.5% and the prime rate to 5%. Those who took out a mortgage between 2022-2024, when the prime rate was at 5.75% or higher, may currently be paying significantly higher interest than what the market offers — and this is exactly the time to check refinancing.
What is Mortgage Refinancing?
Refinancing (re-financing) is the replacement of the existing mortgage with a new loan at a lower interest rate — either with the same bank or a different one. The goal: to reduce the monthly payment or shorten the loan term, while taking advantage of the lower interest rate that has resulted from the three rate cuts.
When is Refinancing Really Worthwhile?
Refinancing is not always advisable — it has associated costs that need to be offset against the savings:
- Early repayment fee — calculated based on the "discount fee" which depends on the difference between the interest rate taken and the current average rate of the Bank of Israel. The larger the gap (and currently, after 3 cuts, it is indeed large), the fee can be significant for tracks linked to prime less, but is usually low or negligible for the prime track itself.
- File opening costs — a one-time fee at the new bank, usually a few thousand shekels.
- New appraisal — if switching banks, an updated appraisal of the property may be required.
A common rule of thumb: refinancing is worthwhile when the interest rate difference between the existing track and the current market rate exceeds 0.5%-0.7%, and the remaining loan balance is still long enough (usually over 10 years) for the accumulated savings to exceed the refinancing costs.
Example Calculation
A mortgage of 1,500,000 ₪ with a balance of 20 years: switching from a fixed interest rate of 5% to a fixed interest rate of 3.9% (reflecting the current average interest rate of the Bank of Israel) reduces the monthly payment by about 800-900 ₪ — a saving of about 10,000 ₪ per year, and sometimes significantly more over the life of the loan, even after deducting refinancing costs.
Prime Track — Often Already "Refinanced" Itself
If part of your mortgage is on the prime track, you are already automatically benefiting from the recent rate cuts — the payment on this track has decreased with each cut, without the need for refinancing. The relevant check is mainly for fixed interest rate tracks (linked and unlinked) that were taken when the interest rate was higher.
Forecast Ahead — Should You Wait for Another Refinance?
According to the official forecast of the Bank of Israel (July 2026), two more rate cuts are expected by mid-2027, aiming for about 3.0%. Those very close to the refinancing threshold today may consider waiting for another cut — but those who are already exceeding the savings threshold (a gap of 0.5%+), there is no reason to wait and lose out on monthly savings.
Related: Balloon Loan on the Equity of the Property
If your goal is not only to reduce the payment but also to pull cash from the property (for example, to finance another apartment or renovation), see the complete guide to balloon loans on equity — a mechanism different from regular refinancing.
Checking if Refinancing is Worthwhile for You?
Before approaching the bank, it is advisable to calculate the gap between your existing interest rate and the market rate, and check the early repayment fee with the current bank. Looking for advice, or considering using the savings to purchase another property? Check out properties for sale in Ma'ale Adumim and properties in Jerusalem, and contact the Merkaz HaNekasim team to connect with a recommended mortgage advisor.