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Saudi SRC cuts rates for long-term fixed rate mortgages

RIYADH, June 1, 2019

Saudi Real Estate Refinance Company (SRC) has announced that it has reduced rates for its long- term, fixed-rate (LTFR) mortgages offered to eligible borrowers, by its partners (banks and mortgage finance companies).
 
Fully owned by the Saudi Public investment fund, SRC was established in 2017 with the goal to help transform the local housing market.
 
This comes in sync with Saudi Arabian Monetary Authority (SAMA) announcement of its new statistical bulletin listing a new record for real estate mortgages during the last month.
 
SRC said the move is aimed at supporting the stability and the growth of the secondary mortgage market and to increase liquidity and facilitate access to domestic and international financing sources. 
 
The Saudi firm has reduced the profit rates on 15-20-year LTFR (long-term fixed-rate) mortgage loans, dropping, for example, the 20 years from 7.10% APR (Annual percentage rate or the annual rate charged for borrowing or earned through an investment) (3.85% Flat) to 6.25% APR (3.52% Flat) effective April 24. 
 
Driven by macroeconomic factors, the rate drop enables SRC and the partner primary originators to pass on the benefits to end borrowers.
 
The announcement follows SRC’s acquisition of portfolio of mortgages worth SR750 million ($200 million) purchased from leading banks and mortgage finance companies in the kingdom. 
 
SRC had also signed multiple portfolio acquisition agreements with its partner lenders at the Financial Sector Conference held in Riyadh in April.
 
"The rate drop on our already attractive LTFR products makes home ownership ever more affordable and accessible for Saudi citizens, and on the back of the great work done by the DMO/MOF to extend the tenor of the curve, we will soon provide competitive pricing for even longer tenor," said its CEO Fabrice Susini. 
 
"This also acts as a critical enabler in facilitating the mortgage penetration, which is among the lowest in the region," he noted. 
 
"In this context, the development of a secondary housing finance market will ultimately meet the Vision 2030 housing sector goal of increasing home ownership to 60 per cent by 2020 and 70 per cent by 2030," stated Susini.
 
The reduction of rates on mortgages also follows SRC’s sukuk (Islamic bond) issuance of SR750 million in the first quarter of 2019 as part of SR11 billion sukuk establishment programme. 
 
According to Susini, the sukuk programme supports SRC’s strategy to purchase more home loan portfolios from mortgage financing companies and banks to boost the kingdom’s secondary mortgage market. 
 
As part of the sukuk programme, SRC is expected to make multiple sukuk issuances in 2019, he added.-TradeArabia News Service



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