Banks have submitted a request urging the Central Bank to lower minimum downpayments on mortgages to first-time buyers by almost half.
Banks submitted a proposal to the Central Bank yesterday requesting that the 50 per cent minimum deposit for expatriates making their first property purchase be lowered to 30 per cent, according to two bank sources with direct knowledge of the matter.
Last month, the Central Bank directed lenders to impose a 50 per cent minimum downpayment and a 60 per cent deposit on their second sales. Emiratis must make a 30 per cent downpayment on their first purchase and 40 per cent on further sales. Since then, estate agents have warned that the mortgage market dried up almost overnight while banks have sought to lobby the Central Bank for a reprieve.
Fearing a collapse of property values and a hit to their profits, banks have submitted an alternative limit.
"A 70-30 [ratio of loans to value] would make better sense than 50-50," said one of the sources.
The Emirates Banks Association, the industry group which is leading lobbying efforts over the mortgage cap, submitted its proposal to the Central Bank yesterday.
"The proposal included a number of issues related to loan to value ratio, type of property (completed or under-construction) and the nature of the investor whether resident or non-resident," the lobby group said in a statement, declining to give further details.
The Emirates Banks Association had previously requested the Central Bank to postpone the implementation of the regulation for 30 days in order to allow banks to better assess the new rule.