For the first time in a decade, banks in Saudi Arabia have reduced the monthly salary deduction rate for new personal and mortgage loans, aiming to support middle- and low-income employees while maintaining financial stability.
New deduction rate eases loan burden for Saudi employees
Saudi financial institutions have cut the monthly deduction cap on personal and mortgage loans to 55% of the total monthly salary for employees earning below SAR 15,000, down from the previous 65% limit in place since 2014. This update applies regardless of whether the loan is subsidized or not, according to sources cited by Al-Eqtisadiah newspaper. The move reflects a strategic effort to improve the quality of life for lower- and middle-income groups by balancing access to home financing with household financial sustainability.
Responsible lending rules and loan exceptions in Saudi Arabia
Data from Argaam reveals that the responsible lending principles in Saudi Arabia require monthly credit obligations for individuals earning less than SAR 15,000 to stay within 55% of their income. However, an exception exists for clients benefiting from home financing products backed by the Ministry of Municipalities and Housing or the Real Estate Development Fund (REDF), where monthly obligations may still reach 65% of total income. This distinction ensures that beneficiaries of government housing support programs can maintain access to larger loans while protecting other borrowers from over-indebtedness.
Growth in mortgage lending despite tighter caps
Despite the lower deduction limits, mortgage lending in Saudi Arabia continues to expand robustly. According to Argaam’s latest figures, mortgage loans granted by commercial banks to individuals and companies increased by 15% year-on-year, reaching approximately SAR 932.8 billion (around $252 billion) by the end of Q2 2025, up from SAR 814.6 billion (about $220 million) in the same period last year. This growth highlights the ongoing strength of the Kingdom’s real estate sector and the effectiveness of measures designed to balance sector support with consumer financial health.By lowering the monthly salary deduction percentage, banks are aiming to provide greater financial flexibility for employees with limited incomes. The change is seen as a step toward more responsible lending practices, reducing the risk of loan defaults while supporting housing affordability.
