UAE banks to meet over Central Bank's mortgage cap

UAE banks are scheduled to meet on Wednesday to discuss further their response to new central bank caps on mortgage lending.

The meeting follows a circular issued by the country's top banking regulator that directed lenders to limit mortgages to expatriates to 50 per cent of a property's value. Mortgages to UAE citizens were restricted to 70 per cent of a property's value under the new rules.

A retail banking committee of the Emirates Banks Association (EBA), a local industry body, is set to talk over a range of proposals at the Wednesday meeting to ease the burden of the new regulations, according to a senior banker familiar with the matter. A banks association employee confirmed the meeting was scheduled to take place in Dubai.

Bank chief executives had already met last week to discuss the issue and plan a response.

"The EBA's retail committee is looking into this and are supposed to give a paper with recommendations to the chairman later this week," the banker said. "They will give arguments, explain why are they are recommending certain things, discuss the pros and cons related to the [central bank's] decision and how it can be improved."

The new caps have rankled local lenders, who are pushing for a reprieve amid worry that the rules could scuttle a tentative property market recovery that took hold last year. Banks typically lend between 70 per cent and 80 per cent of the value of properties they finance, a second local banker said.

Banks are hoping that the central bank will compromise on loan-to-value ratios, the banker said, adding that bankers were frustrated with the lack of communication or consultation from the regulator. It "doesn't look like something the central bank would be willing to back out from," the banker said.

* Dow Jones