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Saudi Arabia has sold its first mortgage-backed securities through the Public Investment Fund-owned Saudi Real Estate Refinance Co. (SRC), opening a market that can help boost home ownership while freeing up bank balance sheets for other lending, including for Vision 2030’s ambitious projects.
“Banks can’t keep mortgages on their balance sheets forever,” Hina Shoeb, managing director and head of analytics for Saudi Arabia at S&P Global Ratings, told Semafor. “They need to recycle capital” to maintain the pace of lending for big projects, “and securitization is how you do that,” she said.
Saudi banks held about $180 billion in mortgages at the end of 2024, almost a quarter of total loans. These assets create a “substantial base” for a securitization market, according to S&P.
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In the US, the daily volume of such debt instruments is around $300 billion. For Saudi Arabia, residential mortgages are just the start, Shoeb said. Auto loans, credit cards, and project finance could also be securitized and sold off to international investors, she added.
One of the biggest names in global finance is already on board: SRC, and PIF, are working with BlackRock, the $13-trillion asset manager led by Larry Fink, a pioneer of US mortgage-backed securities.
Reforms to foreclosure law and the high share of government-employed borrowers make Saudi credit relatively strong. “If you have real collateral behind the mortgages, and a government guarantee on top, this is as strong a starting point as you can get for a new market,” Shoeb said.
Notable
- Saudi mortgage volumes are still climbing even as the housing market cools, sustained by government programs that make it easier for first-time buyers to access financing, according to AGBI.
- BlackRock’s Larry Fink said Saudi homeowners could see cheaper mortgages if the kingdom taps fixed income markets, Bloomberg reported, noting that mortgage spreads are wider than they would be with a securitization market.