Saudi’s PIF establishes $20bn mortgage company

Saudi Arabia’s Public Investment Fund has established a national mortgage refinancing company in an attempt to boost the kingdom’s real estate sector.

The Saudi Mortgage Refinancing Company will seek to inject liquidity in the mortgage market and provide about SAR75bn ($19.9bn) of refinancing initially. This will increase to SAR170bn ($45.3bn) by 2026.

The firm aims to perform a brokerage role “by aligning the liquidity, capital and risk management requirements of mortgage companies with risk tolerance and investment return targets for investors,” according to Saudi Press Agency.

Its mandate includes the acquisition of mortgage portfolios, expansion of Saudi mortgage companies and facilitation of access to local and international sources of finance.

The company, which is chaired by housing minister Majid Al-Huqail, will also issue sukuk as mortgage backed securities and provide short and long-term financing services to mortgage companies.

The launch comes amid expectations that demand for mortgages in the kingdom will increase from SAR280bn ($74.6bn) this year to SAR500bn ($133.3bn) by 2020.

The kingdom is aiming to increase the percentage of homeowners among Saudi citizens from 47 per cent today to 52 per cent by 2020 as part of its reform efforts.

In order to do so, it is building hundreds of thousands of new homes and increasing access to mortgage financing.

Read: Saudi launches mortgage guarantee programme

At the start of the year, banks were granted permission to lend buyers 85 per cent of the value of a home, up from 70 per cent previously, and last month the central bank scrapped administrative fees for mortgage holders if they switch between fixed and floating rate loans.

Read: Saudi central bank announces measures to cut mortgage costs

Read: The move will apply to purchases of first homes by Saudi citizens