Although the Saudi banking sector remains strong, the latest analysis from Al Rajhi Financial Company point to clear signs of a slowdown in mortgage financing, raising important questions about the trajectory of the real estate market in the coming period, especially given the decline in mortgage loans and changes in lending behavior and residential demand.
Al Rajhi Capital explained that the resilience of Saudi banks" profits does not necessarily reflect similar momentum in the mortgage market, as housing and mortgage-related loans experienced a notable slowdown during the final months of 2025, amid financing pressures and shifts in demand.
According to the report, bank credit growth slowed in November, which directly affected mortgage loans, which fall under the category of personal loans. Although this type of loan recorded modest monthly growth, annual rates remained weak, indicating increasing caution on the part of both banks and borrowers.
Mortgage Loans Decline
Mortgage loans declined for the fourth consecutive month, reaching approximately 5.4 billion riyals, marking both a monthly and annual decline—a level clearly below the annual average of 8.6 billion riyals. This decline reflects sluggish demand for housing finance, whether due to higher borrowing costs or the postponement of purchase decisions by individuals and investors.
Conversely, the report showed that the stability of bank deposits, particularly time deposits, strengthens banks" ability to continue financing the real estate sector in the medium term; however, the allocation of this liquidity remains subject to risk and return assessments, given the slowdown in mortgage lending compared to previous years.
Furthermore, the decline in consumer spending and shifting individual priorities have contributed to a slowdown in real estate demand, particularly in the mortgage-financed housing market, forcing real estate developers to reassess their pricing and marketing strategies and rely more heavily on flexible financing solutions.
While Saudi banks remain in a strong financial position, current mortgage indicators reflect a transitional phase in the real estate market, characterized by caution and a wait-and-see attitude, as the market awaits new catalysts that could restore momentum to mortgage lending—whether through lower financing costs or the launch of support programs to boost residential demand in the coming period.
