The wave of layoffs in the tech sector is deepening, driven by a weak dollar exchange rate and the entry of artificial intelligence tools. Since the beginning of the year, about 8,500 employees (approximately 2% of those employed) have been displaced from Israeli tech, and if the pace continues, the industry could part ways with about 10% of its workforce by December. The Innovation Authority estimates that layoffs will continue even if the dollar exchange rate rises.

The number of unemployed individuals has doubled since 2022, reaching 16,000 last December. Software developers, who constitute about 60% of job seekers, are the primary casualties struggling to return to the market, given that, unlike in the past, the waiting period today is much longer. Reality shows that many tech workers who took on heavy commitments based on the high salaries they earned are now facing a highly severe cash flow problem: Families that found themselves with an income that dropped sharply, against fixed mortgage repayments that have become a heavy burden. Mortgage consultants share that these are not isolated cases, but rather a real trend, and social networks are already filled with questions from people caught in this situation.

Dan Bar Ilan, a senior programmer who earned NIS 24,000 net, was recently laid off. His joint income with his wife Dikla dropped from NIS 37,000 to just NIS 13,000, against an exaggerated monthly repayment of NIS 11,000 (for a mortgage of NIS 1.4 million). "We put all our savings into the apartment; I didn't make an exit," he shares. "Now we live off the severance pay, and that too will run out." Yair and Renana, parents of three, were also caught in this trap. Renana, a programmer who earned NIS 26,000, was laid off about two months ago. Together with Yair, a civil engineer (NIS 17,000), they stand helpless against a repayment of NIS 15,000 a month, which previously constituted 35% of their income. "We aren't touching the severance pay," says Renana. "To my great luck, the parents are helping."

According to the Taub Center, artificial intelligence tools already replace about 16% of the tasks of an average tech worker, and many companies are adopting them to reduce hiring. Concurrently, the vacant positions that exist in the market mainly target the fields of hardware and infrastructure, and therefore they simply do not suit many of those laid off. Those who are not absorbed into a new job are forced to rely on unemployment benefits, which bring with them a drastic drop in the standard of living. At Okatz Systems, a company dealing in the field of payroll, they note that someone who earned NIS 30,000 gross will now have to get by with just NIS 12,670 (42% of their salary), and someone who earned NIS 40,000 dropped to just NIS 13,769 (34%).

"It's simply impossible," says Dan. "We have two children in private kindergartens in Tel Aviv, which cost us NIS 9,000 a month. Add a repayment for a leased car, which stands at another NIS 3,000, and that's before I've opened my mouth about food. The cost of living here is insane, and together with the mortgage repayment and its increase due to the interest rate, we are simply drowning."

"The cash flow pressure on tech workers who took mortgages started even before the wave of layoffs," explains mortgage consultant Avi Sofer. "The accepted mix in the industry, where two thirds of the loan were taken in variable tracks, exposed these borrowers with full force to the rising interest rate in the economy." Sofer adds that: "At the time of signing, the base interest rate was negligible, but when the policy changed, the variable tracks jumped to levels of 6.5% to 7%. The result is that the monthly repayments climbed by thousands of shekels, becoming a heavy weight."

The story of Avner and Tamar demonstrates exactly this trap. About four years ago, they took a mortgage of NIS 1.8 million for 20 years. The fixed component, which constituted a third of the amount and was taken at an interest rate of about 3%, generated a stable repayment of about NIS 3,300. On the other hand, the variable component, which stood at NIS 1.2 million, jumped from an interest rate of 2% to about 6.75%. The result on the ground: The repayment on the variable component climbed from NIS 6,100 to NIS 9,100, and on the bottom line, the total repayment jumped from NIS 9,400 to about NIS 12,450 a month. This is a jump of about 32% (another NIS 3,050 each month), which means an excess annual cost of NIS 36,000. "Soon there will be a round of layoffs at my company, and I am in severe anxiety about the consequences," shares Avner. "Colleagues of mine have been looking for a job for half a year already; it's a terrifying fear."

The emphasis, again, is that this is not a passing crisis: Wix, Artlist, Amdocs, Hailo, and Lightricks, and dozens of other companies that laid off employees during recent months, this may only be the promo. "Within about a year, we will see a wave of layoffs of 25%–30% of tech workers," Hedva Ber, Deputy CEO of eToro and former Supervisor of Banks, recently noted during a conference of the Calcalist newspaper. "The tech engine is leaving the Israeli economy. If there is no significant change in policy and the exchange rate, we will see in the near future a wave of layoffs and a cut of about 25%–30% of the sector's workers, in the next half year to a year."

Withdrawing severance funds offers those laid off an immediate solution, but it is a highly expensive decision. CPA Asaf Daniel, CFO at Okatz Systems, explains that this component constitutes over a third of pension savings, and its early redemption could erode the old–age pension by 35% to 40%. Additionally, a withdrawal beyond the exempt ceiling before retirement age incurs tax payment according to the marginal tax bracket, which among many tech workers is high. Furthermore, the funds in the box are protected against foreclosures until the date of their withdrawal.

In a state of financial distress, banks prefer to reach an agreement with the borrower over taking foreclosure proceedings. Therefore, the door to negotiation always remains open, even when the situation seems helpless. Each case must be examined on its own merits with a professional mortgage consultant to find the most suitable solution for you.

At the same time, for buyers who purchased a property for NIS 4 million and took a mortgage amounting to NIS 3 million, the financial maneuvering room is extremely limited. In these cases, the monthly mortgage repayments are radically high. Standard steps like changing the mix of tracks or extending the loan period (spreading years) do not provide a sufficiently significant reduction in the monthly repayment. Therefore, in many cases, the only realistic solution to prevent economic collapse is selling the apartment and moving to a cheaper property.

Alongside this, mortgage consultant Avi Sofer explains that for borrowers with mortgages in the range of NIS 1.2 to 2 million, several structured and effective assistance tools exist that allow stabilizing cash flow and preventing damage to the credit rating. One central tool is payment deferral (grace), which allows freezing principal payments or full mortgage payments for a period of several months. This tool grants breathing room in the short term, but it is important to remember that the deferral involves the accumulation of interest and makes the loan more expensive.

Another solution is mortgage refinancing, which allows readjusting the interest rate tracks and repayment period to market conditions and the borrower's current capability. Additionally, many tech workers can leverage their savings by obtaining an attractive loan at the prime interest rate, amounting to 50% to 80% of the study fund, without redeeming the savings.