The Variable CPI-Linked Track (Matz)
The variable CPI-linked loan, or Matz for short, is a common mortgage product where both the interest rate and the principal move — the principal changes monthly in line with the Consumer Price Index (CPI), and the interest rate resets at fixed intervals (typically every 2–5 years).
Regulatory limits
Under Bank of Israel directives, the combined holding of Matz together with Prime and Malatz may not exceed 66.66% of the total mortgage debt. This limit exists because these variable-rate loans are considered risky loans.
What affects the interest rate?
An analysis of current market interest rates shows that the loan-to-value ratio (LTV) is the dominant factor driving the interest rate — not the loan term. For up-to-date interest-rate figures, see the interest-rate statistics.
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Early prepayment fee
Yes, an early prepayment fee does apply. However, the regulations treat this favorably: the calculations assume the entire principal is repaid on the next interest-rate update date, which significantly reduces the fee amounts.
Advantages
- Potential to reduce interest rates — it can lower the rates on the other loan tracks, because this is a very profitable loan for the bank.
- Well suited for early prepayments — the lower interest rate (thanks to CPI indexation) makes it especially well-suited and efficient for prepayments.
- A negotiation tool — useful as part of a teaser-rate loan strategy to bring down the overall portfolio interest rates.
Disadvantages
- Volatility in the monthly payment — the payment changes every month with each CPI update.
- Risk of an interest rate jump — every 2–5 years, at the interest rate update dates, the monthly payment can jump significantly.
- The riskiest and most expensive loan type — if included incorrectly in the mortgage mixture.
This loan is especially risky. The monthly payment changes every month with the CPI, and on top of that the interest rate terms reset periodically — dual exposure to changes.
Common mistake
Many borrowers don't recognize the dual variable nature of this loan, which leads to badly structured mortgage mixtures where the Matz ends up as the most expensive component.
It's important to understand that the Matz isn't a "bad" loan — it simply demands a solid understanding and the right placement. In professional hands it can be an effective tool, but without proper planning it can turn into the most expensive loan in the mortgage mixture.