Reprieve for homebuyers as UAE mortgage rule won’t apply until mid-2013

Mortgage cap: Stricter limits on mortgage lending will not be imposed without consultation with banks, Central Bank governor tells Al Ittihad.

The UAE will not impose limits on mortgage lending without consulting commercial banks, and any new rules are not imminent, the Central Bank governor Sultan Nasser Al Suweidi was quoted as saying by Al Ittihad.

The Central Bank is working on new rules for the property mortgage industry but they will take at least six to nine months to emerge, the newspaper quoted Mr Al Suweidi as saying.

"The current system for real estate financing in the country hasn't been changed," he said. "The new regulation that the Central Bank is preparing will make more liquidity available for the real estate industry."

A circular sent to commercial banks last month said mortgage loans for expatriate buyers should not exceed 50 per cent of the property value for a first purchase of a home, and 40 per cent for second and subsequent homes. Caps for UAE citizens were set at 70 per cent for a first home and 60 per cent for subsequent ones.

Mr Al Suweidi said there was a "misunderstanding" in the media and that no Central Bank ruling had been issued, only a warning to banks to be prepared for rule changes in the future.

Directives sent last month to lenders restricting mortgages are meant to "draw their attention to certain standards that are expected to be adopted under the new system," Mr Al Suweidi told Al Ittihad. "The Central Bank is usually cautious."

The new rules will be discussed with the banks before they are adopted and should allow a higher lending cap for people who are planning to live in the home they are buying as opposed to those who are investing in real estate, the governor was reported as saying.

Suweidi's office told Reuters that he was not immediately available to comment.

* With Reuters and Bloomberg

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