Mortgage refinance firm Saudi Real Estate Refinance Co. (SRC) said on Tuesday it has cut the mortgage benchmark curve, or the long-term financing rate (LTFR) by 26 basis points (bps) for mortgage tenors between 20 and 30 years.

The rates for mortgages shorter than 20 years is maintained, the company said in a statement on Tuesday.

SRC, which is wholly owned by the Saudi sovereign wealth fund Public Investment Fund (PIF), buys home financing portfolio from local banks and non-bank lenders. It has a portfolio of SAR13.5 billion ($3.6 billion) as of 2021.

The reduction in LTFR mortgages is expected to be positive for housing demand in Saudi Arabia.

Saudi Arabia has pushed home ownership as part of its Vision 2030 strategy.  Retail mortgages in the kingdom have jumped as the government expanded the number of lenders.

The percentage of Saudi's homeowners rose to 62% from 47% between 2016 and 2020, according to government data. The objective is to hit 70% by 2030.  

The LTFR mortgage curve was introduced in 2018 as a benchmark for long-term fixed rates mortgages to stabilise the residential real estate sector in the kingdom and protect borrowers against interest rate volatility.

Fabrice Susini, CEO of SRC said the reduction will support Saudi’s real estate sector.

"We believe that this reduction that comes on top of our extension of the benchmark from 25 to up to 30 years tenor will contribute to maintain the demand for affordable housing and … support the real estate industry's growth, thus contributing to the overall economic development of the kingdom."

(Writing by Brinda Darasha; editing by Cleofe Maceda)