Saudi Arabia’s first mortgage-refinancing firm has started approaching banks to buy their mortgage portfolios as the state tries to boost lending for homes, according to a report.

The state-run company, created to develop a secondary market for home loans, will have SR5 billion ($1.3 billion) of its own capital and will work with the government’s Real Estate Development Fund (REDF) to invest another SR5 billion buying mortgage portfolios, said Bloomberg, citing the country's Housing Minister Majed Al Hogail.

“We expect to start buying the portfolios from the banks in late May or mid-June. Hopefully by the end of the year, we will securitising this portfolio," Al Hogail was quoted as saying in the report.

Saudi Arabia is taking a number of measures to increase home construction and lending as it seeks to overcome one of the world’s lowest mortgage penetration rates.

The absence of a mortgage-finance firm similar to Fannie Mae and Freddie Mac in the US has limited the ability of banks to expand their mortgage books amid central-bank restrictions on concentrations of loans from any one sector, said the Bloomberg report.

Al Hogail pointed out that the value of mortgage portfolios in the banks was currently around SR116 billion ($31 billion). "We will start buying shares of that gradually," he added.