Saudi cbank raises home mortgage limit to 85%

The Saudi Arabian Monetary Agency (SAMA), the kingdom’s central bank, will allow mortgage companies to contribute a greater share of funding for home purchases, it said on Tuesday.

The central bank raised the maximum permitted contribution to 85 percent from 70 percent of the value of the house.

The move is part of a series of steps taken by the Saudi government to ease financing for home ownership.

“More than a year after introducing the home mortgage regulations, SAMA is now confident that home mortgage firms are capable of dealing with risks related to the sector and adjusting to face its challenges, unlike banks, they don’t have deposits,” SAMA governor, Fahd Al-Mubarak, said in a statement carried by state-run Saudi Press Agency.

Raising home financing limits to 85 percent will help foster competition for providing better finance costs and services, which will serve loan seekers and the market in general, without risking the stability of the real estate finance sector, Al-Mubarak added.

The regulator set the earlier requirement in November 2014 after the kingdom approved a mortgage law years after careful deliberations. But many complained that a 30 percent down payment by the buyer on a property’s value was unaffordable for most people and almost dried up demand for mortgages.

In February, SAMA cut by half to 15 percent of the property’s value down payment for eligible Saudi citizens, while 15 percent will be guaranteed by the finance ministry. Commercial banks would provide the remaining 70 percent against the property, it said, adding that more details will be disclosed in the future.

The kingdom has been accelerating efforts to make homes more affordable for its growing population. The housing ministry said as many as 1.5 million homes will be needed in the next seven years.