UAE mortgage credit dips in Q1

Mortgage credit provided by UAE banks dipped by nearly Dh4 billion in the first quarter of 2013 following a decision by the Central Bank to cap such loans in a bid to prevent a US-style Subprime crisis, official data showed on Tuesday.

Mortgage credit offered by the 51 banks in the second largest Arab economy has slackened over the past three years but it was the biggest quarterly fall this year as it slumped to nearly Dh155.9 billion at the end of March from Dh159.8 billion at the end of 2012, showed the figures by the Central Bank.

Month-to-month, mortgage loans shrank by about Dh2.8 billion from Dh158.1 billion at the end of February and the Central Bank gave no explanation for such a big drop.

But the decline followed it decision just before the end of 2012 to cap mortgage loans to prevent a property crisis as the sector began to pick up following a sharp slowdown in the wake of the 2008 global fiscal distress.

In a circular in late December, the central bank told the UAE’s 23 national banks and 28 foreign units that it had decided to cap mortgage lending.
According to the new rules, mortgages for expatriates were limited to 50 per cent of the property’s value for their first property, and 40 per cent for the second unit.
For UAE nationals, the mortgage rate was slashed to 70 per cent for the first property and 60 per cent for the second unit.

The Central Bank’s move followed a recovery in the mortgage sector in the third quarter of 2012, when banks sharply boosted domestic mortgage credit.

Official data showed such loans leaped by nearly Dh11 billion in the third quarter, a growth of around 4.4 per cent over the second quarter.

Growth stood at 4.8 per cent Y/Y, the largest quarterly increase since the credit boom during 2007 and most of 2008, according to bankers.

The figures showed mortgage credit at the end of March 2013 accounted for around 20.8 per cent of the banks’ claims on the private sector of around Dh745.5 billion compared with nearly 21.8 per cent at the end of 2012.

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