Regulatory Alerts2018-01-14
Increase the Maximum Mortgage for Citizens to Own the First Home
The Saudi Central Bank has increased the maximum mortgage financing limit for Saudi citizens purchasing their first home from 85% to 90% of the property value. The directive maintains existing financing caps of 70% for banks and 85% for finance companies on second homes and beyond for all applicants. Institutions are required to strengthen risk management frameworks, monitor credit concentrations, and rigorously verify borrowers' repayment capacities before approving any financing.
In the name of Allah, the Most Gracious, the Most Merciful Saudi Central Bank Head Office
General Directorate of Supervision of Finance Companies
Ref. No.: 391000048362 Date: 27/04/1439 AH Attachments:
Circular
To: Distinguished
Peace, mercy, and blessings of Allah be upon you,
Subject: Increase the Maximum Financing Limit for Citizens to Own the First Home.
I refer to Article 12 of the Executive Regulations of the Mortgage Financing System issued by Royal Decree No. M/5 dated 13/08/1433 AH, which stipulates that "a mortgage financier shall not grant credit in any financing format exceeding (70%) of the value of the property subject to the mortgage financing contract, and the Bank may change this percentage according to prevailing market conditions", Circular No. 371000064087 dated 06/06/1437 AH, and Circular No. 381000039082 dated 10/04/1438 AH, and based on what public interest dictates.
I would like to inform you that the Bank has decided to increase the maximum financing-to-property-value ratio stipulated in Article 12 of the Executive Regulations of the Mortgage Financing System, as amended by the aforementioned circulars, from (85%) to (90%) of the value of the first home for citizens only. Banks and mortgage finance companies shall continue to grant mortgage financing at (70%) and (85%) of the property value, respectively, for the second home and beyond, and for all beneficiaries.
The Bank emphasizes the importance of reviewing risk management policies to enhance procedures for maintaining financial soundness, including monitoring and measuring credit concentrations, and committing to verifying the beneficiary's repayment capacity before granting financing - in all its forms - taking into account the beneficiary's existing financial and credit obligations, in compliance with the Bank's relevant instructions.
For your information and compliance effective from the date hereof. Yours sincerely,
Ahmed bin Abdullah Al Sheikh Deputy Governor for Supervision
Distribution Scope:
- Banks licensed by the Bank
- Mortgage finance companies licensed by the Bank
- Supervision Department Directorates
P.O. Box 2992, Riyadh 11169, Phone: +966 4662020, Fax: +966 4662488