39% of Israelis spend more than they earn amid rising living costs

Some 2.5 million Israeli households or 39% of the country’s adult population currently spend more than they earn due to rising war-related living costs, according to a report published by the Israeli NGO organization Fresh Start.

A growing number of Israeli families are struggling with rising prices and taxes amid the war with the Iranian-backed terrorist proxies. Fresh Start seeks to assist indebted businesses and households. 

Israeli families are also facing growing interest rates. Recently released data by the Bank of Israel reveals that Israeli banks charged households 12.7% interest on overdrafts in November 2024 compared to 11% at the end of 2023. By the end of November last year, Israeli citizens had accumulated overdrafts amounting to NIS 9.75 billion ($2.7 billion). 

Sharon Levin, director of Communications and Public Affairs at the NGO Paamonim, says her organization has noticed a dramatic increase in the number of families who are unable to finance their monthly expenses. 

“Over the past month, we were approached by about 1,200 families who are drowning in debt, which is about double the number we saw before the start of the war [in October 2023],” Levin said in an interview with The Times of Israel. 

“Many households take out more loans while still in overdraft, struggling to break the debt cycle as interest rate costs remain high, and the war displaced families from communities, and many are called up on reserve duty,” Levin continued. 

“Since the outbreak of war, debt repayment costs have increased by an average of about NIS 1,500 a year per household,” she assessed.

While the war has had a negative impact on the economy of many Israeli households, Levin emphasized that the problems preceded the current war. 

“Even before the war, the average cost of monthly mortgage payments went up by NIS 800 to NIS 1,200, due to a steady rise in interest rates about two years ago.” 

Tomer Rabinowicz, a bankruptcy lawyer who founded Fresh Start, explained the complex financial challenges that many Israeli families face amid the war. 

“Interest rates are high, basic household expenses are more expensive because of price hikes and tax increases, while income has remained the same,” Rabinowicz assessed. 

“The banks are making billions of shekels in profits while businesses are collapsing during the war because of military call-up and the fast evacuation of citizens – this is not fair,” he stated.

Rabinowicz urged the Bank of Israel to intervene in order to restore financial stability. 

 “The Bank of Israel should instruct the country’s lenders that they have a responsibility not only to maintain their financial stability, but also for their clients by, for example, supervising the percentage of the most dangerous loans.”

“With correct intervention, you can save highly indebted businesses and households and this is what the government should invest in, including financial education, guidance and mentorship, rather than giving them more loans,” Rabinowicz concluded. 

The Bank of Israel Governor Amir Yaron estimated in June 2024 that the Gaza war would cost the Israeli economy some $67 billion in military and civilian expenses between 2023 and 2025. 

Senior Israeli economists warned in August 2024 that the Gaza war threatened Israel’s long-term economic stability and viability. 

“The economy right now is under huge uncertainty, and it’s related to the security situation – how long the war will go on, what the intensity will be and the question of whether there will be further escalation,” warned Karnit Flug, the former head of the Israel Central Bank.