Saudi mortgage market activity is showing early signs of recovery after a weak first half of 2026. Lower borrowing costs are improving financing conditions for homebuyers. June lending figures also showed stronger monthly activity, suggesting mortgage demand could gradually improve during the second half of the year.
Mortgage activity slowed considerably during the first six months of 2026. New residential mortgage contracts fell by 21 percent during the period. The total value of issued mortgages also declined by 30 percent, highlighting weaker demand and continued affordability pressures across the housing market.
However, June figures showed a notable improvement compared with May. Mortgage lending reached about SAR1.3 billion during the month, representing an increase of almost 30 percent. Banks also recorded close to 9,000 mortgage transactions, providing an early indication of stronger demand.
Lower interest rates have played an important role in improving affordability. Financing conditions have become more supportive after borrowing costs reached recent highs. Consequently, some households may now find home financing more manageable, although housing affordability remains a significant challenge.
Housing costs have risen faster than incomes for some households. This gap has limited purchasing power and created pressure on mortgage demand. Potential buyers therefore continue to consider monthly repayments, down-payment requirements, property prices, and broader economic conditions before making long-term commitments.
Government programmes have also supported Saudi Arabia’s housing finance sector. Several initiatives specifically target Saudi citizens buying their first homes. These programmes have expanded access to residential financing while supporting the kingdom’s broader objective of increasing homeownership among Saudi households.
Saudi household homeownership reached 66 percent in 2025, up from 65 percent in 2024. The rate had also reached almost 64 percent in 2023. Therefore, the longer-term trend continues to show gradual progress despite recent weakness in mortgage market activity.
The central bank has also supported housing demand through interest-rate reductions. Lower policy rates have helped reduce borrowing costs for households and businesses. This environment could encourage more potential buyers to consider financing purchases as monthly repayment conditions gradually become more favourable.
Another important measure allows banks to finance up to 90 percent of a Saudi national’s first home. The policy reduces the deposit buyers need upfront. As a result, first-time buyers can potentially enter the housing market with less initial capital.
Banks have also expanded their mortgage product offerings. Longer repayment periods can provide additional flexibility for borrowers and help manage monthly payments. Meanwhile, government housing programmes continue supporting households seeking to purchase homes, particularly those entering the market for the first time.
However, geopolitical uncertainty affected consumer confidence during the first half. Some households delayed major financial commitments because of broader economic concerns. Therefore, weaker mortgage activity did not result solely from borrowing costs, as affordability and economic uncertainty also influenced decisions.
The Saudi mortgage market now appears to be entering a more mature phase. Financial institutions continue developing products that suit different groups of borrowers. First-time Saudi buyers remain a key source of potential demand, while expatriates could become increasingly important.
International investors may also contribute to future residential demand. Recent regulatory changes have expanded opportunities for eligible non-Saudi buyers to own property. The new framework could gradually broaden the residential customer base and create additional opportunities for lenders.
Riyadh and Jeddah could benefit from stronger demand under the new ownership rules. Both cities remain important employment and investment centres. However, the effect on mortgage lending will depend partly on the availability of financing products suitable for eligible foreign buyers.
New ownership rules could therefore broaden Saudi Arabia’s residential market. Banks may see opportunities beyond the traditional Saudi buyer segment as more eligible foreign residents and investors enter the property market. This could eventually create additional demand for mortgage and property financing.
Officials have also explored new approaches to property investment. These include options that could allow foreigners to hold fractional interests. Such measures could support Saudi Arabia’s wider investment and real estate development goals while attracting additional international capital into the housing sector.
Despite the weakness recorded during the first half, the outlook has improved compared with earlier months. Lower interest rates, government support, and stronger June activity provide more favourable conditions for potential buyers. However, affordability will remain a key issue for the market.
House prices and household incomes will continue influencing purchasing decisions. Banks will also monitor borrower confidence and economic conditions closely. Any renewed uncertainty could slow demand for large long-term financial commitments and limit the pace of mortgage market recovery.
Overall, June’s figures provide a more positive signal for Saudi housing finance. The monthly improvement suggests buyers may gradually return as financing conditions become more favourable. The Saudi mortgage market could therefore gain momentum during the second half of 2026.
First-time buyers will likely remain central to future mortgage growth. Meanwhile, eligible foreign residents and international investors could gradually expand the customer base. Continued rate reductions and housing initiatives could provide additional support if affordability conditions improve.
