There has been a lot of talk yet again about a housing bubble in Israel, the latest round being set off by the Bank of Israel’s directive this week putting a ceiling on how much a home buyer can borrow against the price of the house he is buying. But the one place you won’t hear the word bubble is from the Bank of Israel itself.

That is because the bank itself knows there is no bubble, at least in the sense that ordinary people think of one. That is the kind of bubble that the United States and Spain, among others experienced before it burst – a speculative boom fueled by cheap credit, a financial services industry determined to grow even at the cost of taking on indefensible risk and home buyers besotted with the idea that prices will keep going up and up in defiance of all economic logic. The ruin that was left behind from 2008 on makes Hurricane Sandy look like a breeze and should be pause for thought from central bankers to mortgage bankers.

But there is little evidence that that is what is happening here in Israel.

Figures from the State Revenue Administration show that in the 12 months to June 30, the median new home price dropped 10.9% and by 0.8% in the second quarter – the latest for which figures are available – from the first. Could that have reversed in the third quarter? Perhaps, but one quarter is not enough to inflate into a bubble. To the extent home prices are rising, the increase is serving as a corrective to a long period from 1996 to 2007 when they were falling an average of 2.3% a year. In an economy that is enjoying a long stretch of steadily growing output and falling unemployment, it is inevitable that the home prices rise, too.

There is much talk about the how bad it is that large numbers of people are buying homes for investment rather than to live in, thereby artificially driving up prices. But these investors are less present in the market than in the past; they accounted for less than a quarter of all purchases in the second quarter compared with about a third during the 2009-2010 boom. In any case, though speculators they may be, these investors inevitably lease the homes they buy, so they are adding to the rental housing stock and alleviating pressure for others to buy homes.

Even with home sales rising sharply, the balance of supply and demand in the housing market is not out of whack, thanks to a government land monopoly and a hidebound construction industry that limits the number of new units put on the market.

What should be worrying policymakers is not that prices are soaring and that they will eventually come crashing, leaving hundreds of thousands of homeowners underwater (i.e., their home is worth less than the balance of the mortgage they are paying on it). What should be worrying them as that the average family will be unable to both make payments on a home loan and afford the other accoutrements of middle class life.

The ratio between the average home price and the average household’s gross income has risen from just over six years in 2007, before the latest burst in housing prices got underway, to just under eight years. That’s higher than it was in the U.S. even at the peak of the bubble when it was about three-and-a-half year (and is now down to three). In Britain, the ratio is about five years, Ireland 3.25 years (but only 5.5 years at the market’s peak in 2008) and in Canada three-and-a-half years. For more than 40% of mortgages granted in Israel, the repayment schedule eats up more than 30% of the borrower’s income.

The outsized mortgage burden is not just a matter of forgone ski vacations and six months of psychotherapy for the family dog, but spending on the kind of things that make for an informed, educated and enlightened public. It means no tutoring for the children, no budget for culture and entertainment, perhaps even a switch to cheaper and less nutritious food. It will certainly strike a blow at middle class ethos that says that schooling and hard work will lead to material advancement. Not when all that work and education does is to ensure you can cover your housing costs. It constitutes another blow to the middle class, which is it measured by families with incomes between 75% and 125% of the median, has shrunk by about 10% to just over half the population. It is hard to imagine a modern, consumption-driven economy can function when the core of consumers is struggling under these conditions.

Against all of this, the Bank of Israel seems like Scrooge, a mean-spirited fellow intent solely on preserving his own purse even as Bob Cratchit and Tiny Tim starve. True, the central bank gave home buyers a bit of a gift by lowering the base lending rate, but that wasn’t Stanley Fischer’s intent. By placing limitations on mortgages he wants to neutralize any incentive lower borrowing costs would give people to take out a mortgage. Fischer is not worried about rising home prices per se, except as they raise the rate of inflation, but he is worried about the banks – and to be fair to him that is his brief, not preserving the middle class’s sense of self-worth. Mortgage borrowing is growing by leaps and bounds as is the banking system’s exposure not just to home loans. The Bank of Israel is worried that homeowners will simply be unable to cover the burden of repayment, leaving the banks with piles of bad debt. And we know what follows.

The likelihood is that Bank of Israel’s strategy won’t work because Israel isn’t undergoing a speculative bubble but the more prosaic phenomenon of ordinary people looking for a place to live when supply is limited. They won’t be fundamentally deterred by higher rates of interest or tougher loan-to-value ratios. But they and the rest of the country will pay the real price in years to come.