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Some experts say there is a danger of a sudden rush to buy and sell properties ahead of the implementation of any caps later. Ravindranath K / The National
Some experts say there is a danger of a sudden rush to buy and sell properties ahead of the implementation of any caps later. Ravindranath K / The National

UAE back with old mortgage limits as Central Bank now 'seeks opinion'

Mortgage cap: Banking customers can still apply for mortgages of up to 85 per cent of a value of a property as the Central Bank launches fresh consultation on new borrowing limits for Emiratis and expats.

Banks said yesterday they were continuing to offer mortgages of up to 85 per cent of a value of a property after the Central Bank denied it had imposed limits on mortgage borrowing.

Many larger lenders had been preparing to overhaul their caps after a circular sent from the regulator at the end of last year, saying expatriate first-time buyers could borrow a maximum of 50 per cent of a property's value, and Emiratis 70 per cent.

But Sultan Nasser Al Suwaidi, the Central Bank Governor, issued a statement last night on the WAM state newswire saying the Central Bank had not yet enacted any new regulations, instead saying it wanted to seek the opinion of banks and finance companies.

It issued a questionnaire to banks and finance companies, to be returned by the end of January, asking a number of questions including what the maximum amount they felt Emiratis and expats should be able to borrow.

The move comes after comments reported on Monday in Al Ittihad, The National's sister newspaper in which Mr Al Suwaidi blamed a "misunderstanding" in the media and said no ruling had been issued.

His comments have left many banks sticking with their original lending limits.

"Following the notice received from the Central Bank at the end of December, HSBC, as did other banks, initiated preparation to align its mortgage loan to value limits (LTVs) to these guidelines," HSBC said in a statement. "However, following clarification from the Central Bank Governor in the media that the LTV caps released in December have been shared with the market for consultation purposes, we look forward to receiving more information from the UAE Central Bank on the new mortgage regulations and will align accordingly."

The bank offers varying LTV ratios on mortgages, ranging from 60 per cent to 80 per cent.

Emirates NBD, the country's biggest bank by assets, was yesterday selling loans with an LTV ratio of up to 85 per cent. It had been in the process of reviewing its mortgage caps before Mr Al Suwaidi's comments were reported. A bank spokesman yesterday declined to comment on the situation.

Last month's Central Bank circular prompted an outcry from the banking industry, with bankers saying they were not consulted about the rules. Analysts warned the caps may crimp some lenders' profits and risked stalling a revival in the property market.

The Emirates Bank Association, which represents lenders, submitted proposals to the regulator last week seeking lower limits.

"The Central Bank has raised a concern that if things in the market overheat they will respond but the slightly negative impact of their approach has been confusion in the market," said Craig Plumb, the head of research at Jones Lang LaSalle in the region.

Mr Plumb said a danger now existed of a sudden rush to buy and sell properties ahead of the implementation of any caps later.

He also said that the coming months could allow the Central Bank to consider honing its rules to consider legislation allowing a higher lending allowance for a first homebuyer and stricter limits for subsequent purchases.

 

tarnold@thenational.ae

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