Please note: advisory meetings and the service itself are provided in Hebrew only. These guides are here so you can read and understand the topic in your own language.
In every variable-rate track the interest rate is made of two parts:
Rate = anchor + margin
The anchor
The anchor is an external figure that the bank does not set, and it changes with the market. Common examples:
- The Bank of Israel rate – the anchor of the prime track (through the prime rate).
- Government bond yields – a common anchor for "variable every 5 years" tracks, linked and non-linked.
- An average of rates published by the Bank of Israel – in some tracks.
The margin
The margin is the addition (or discount) the bank adds to the anchor. It is set on the day of signing and stays fixed for the whole life of the loan.
Why is the margin so important?
Because you cannot change the anchor, but you can lower the margin in negotiations. A 0.3% difference in the margin on NIS 500,000 over 25 years adds up to tens of thousands of shekels.
An example
Variable every 5 years, non-linked: the anchor on reset day is 3.6%, the margin is 0.8%. The rate for the next 5 years will be 4.4%.
Elia's tip: When comparing offers for a variable track, do not look only at the starting rate. Ask what the anchor and the margin are. A bank can offer a low starting rate with a high margin, and that will cost you dearly later.
More: Variable every 5 years, the prime track.
This article is general information and is not personal advice or a commitment. Rules, interest rates and taxes change from time to time, so check the current situation and your own figures before any decision.