Saudi central bank raises home buyers' loan-to-value limit to 85%

Saudi Arabia’s central bank will allow mortgage companies to supply a greater share of funding for home purchases, raising the maximum permitted contribution to 85 per cent from 70 per cent of the value of the house, it said on Tuesday.

The change is part of a series of steps taken by the Saudi authorities in recent months to make financing more readily available for home purchases, as they seek to address complaints by a burgeoning population of young people over the kingdom’s shortage of affordable housing.

Specialised mortgage companies are deemed capable of bearing the increased risk associated with the change, as unlike commercial banks they do not put deposits at risk, the central bank said.

In December the bank licensed a national home finance company, Bidaya, and in February it introduced an “affordable mortgage” programme through which the Ministry of Finance would guarantee 15 per cent of the financing for a home purchase.

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