Analysis: Mortgage lending in Saudi Arabia at new low as rate hikes quell demand

Analysis: Mortgage lending in Saudi Arabia at new low as rate hikes quell demand

Mortgage lending in Saudi Arabia, a key component of the kingdom's total bank credit to the private sector, softened to a new low in April 2023 as higher interest rates drove away potential home buyers.

Residential mortgage loans provided by the kingdom's commercial banks fell in April fell to 4.1 billion riyals ($1.09 billion) from SAR 7.25 billion in March, new data issued on Sunday by the Saudi Central Bank (SAMA) showed.

Mortgage lending has surged in Saudi Arabia the past decade, often outpacing corporate lending, after the kingdom introduced regulations. It gained momentum in 2016 on the back of a government drive to boost home ownership to 70% under the Vision 2030 programme. As a result of this push, homeownership has increased from 47% in 2017 to 67% in 2022, according to the real estate consultancy Knight Frank.

According to Riyadh-based brokerage Al Rajhi Capital, April clocked the lowest level of mortgage origination since January 2019, and raises concerns over the mortgage growth in the near term.

"There were expectations that mortgages will take a hit from the change in subsidy program, however, the quantum was uncertain. Further, high real estate prices and expectations that rates will fall are also weighing/delaying on mortgage