PHOTO
Mortgage lending in Saudi Arabia, a key component of the kingdom's total bank credit to the private sector, softened further in September as higher interest rates caused demand to stutter.
Residential mortgage loans provided by Saudi Arabia's commercial banks fell to 9.9 billion royals ($2.64 billion) from SAR12.7 billion in August, new data issued by the Saudi Central Bank (SAMA) showed. The number of mortgage contracts signed fell to 12,902 in September from 16,255 in August.
Mortgage lending has surged in the past decade 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.
According to Al Rajhi Capital, the year-to-date mortgage average origination for September is buoyant at SAR10.8 billion compared to its 2022 estimate of SAR 10 billion.
In September, SAMA increased its key interest rates by 75 basis points, mirroring moves by the US Federal Reserve's as the Saudi riyal is pegged to the dollar. The central bank lifted its repo and reverse repo rates by 75 bps to 3.75% and 3.25%, respectively. So far this year the kingdom has raised rates five times. With further rate hikes expected through 2023 and mortgage costs rising further there could be less demand from potential house buyers.
(Reporting by Brinda Darasha; editing by Seban Scaria)
