HSBC eases lending rules on UAE property

Restrictions relaxed on mortgages to offer 70% financing on completed apartments.

HSBC Middle East is to re-enter the mortgage market in a dramatic shift in lending policy, it announced on Tuesday.The bank, which all but pulled out of the home loan market in the UAE due to the liquidity crunch, will now offer 75 percent financing on completed villas, 70 percent on completed apartments and 50 percent on off-plan units.

Previously its loan to value ratio had been lowered to 60 percent and 50 percent for villas and apartments, in a tightening of lending policy that was mirrored across the sector.

Abdulfattah Sharaf, CEO of Personal Financial Services, Middle East said: "This move will provide more flexibility and choice for our customers who are looking to own a home."

"HSBC continues to be a responsible lender and as such the offer is primarily targeted at end-users who have recently faced acute difficulties getting affordable mortgage finance," he added.

Under the terms of the new mortgage deals applicants, nationals and expatriates, must earn a minimum of AED20,000 per month.

The maximum loan term is five to 25 years, or until the borrower reaches the age of 65, which ever occurs first, and interest will start from 8.5 percent, on a variable rate.

In November, HSBC doubled the minimum salary someone must earn to qualify for a personal loan from AED10,000 to AED20,000.

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Posted by: Omar

To all those that left negative comments about the banks and their lending policies I generally agree. I think GREED did rule the day and that is what got us into this global financial mess. However, just to comment on why the current interest rates are so high in the UAE is that the cost of borrowing (interbank) which banks need to do to provide the liquidity required to fund loans has risen. Now that said it has risen everywhere so you could ask why are rates so high in the gulf compared to say the US or Europe? My answer...just a to do with the legal and financial framework in the GCC...where banks have less controls upon them and a more free to operate. I think the matter is more complex than the layman knows. That said in this economic climate the risk of lending is very high (increasing unemployment etc.) and so the banks now want to be cautious. However, they are under pressure to free up credit and increase loans. If they do so charging high interest rates to cover the risk they get slammed for the high interest rates. If they don't loan, fearful of the risks, they get slammed for not freeing up credit. So they are damned if they do and damned if they don't. I took out a sizeable mortgage last year based on high income and a positive view that this income was sustainable. I intended to repay the mortgage in just 3 years. Unfortunately my income stream is greatly reduced and I am now under extreme pressure to maintain my payments. Who should I blame...ME! As the saying goes "Beware...all glory is fleeting!".

Posted by: Manoj Sabharwal

Is it not funny that on one hand banks in the UAE justify exorbitant lending rates to poor liquidity - and yet when you want to repay a loan in full or part, they charge you a 2% fee. Where are the days when you got rewarded for repaying your debt.

Posted by: James

Clearly the same incompetents running the show that got the world into this mess. Any fool can see that the only way to stimulate the market is to cut rates not make more loans. HSBC are not trustworthy either. They gave me a loan based on the US Federal Funds Rate. It was advertised and explained to me as following the direction of this rate. This year they increased it by 1.5% citing "discretionary powers" and EIBOR tracking and some small print powers. Plain and simple - They lied. To take a loan from these bankers is pure folly. The past regime must go and banking must be placed in steady, responsible and trustworthy hand before there will be any recovery in these parts. HSBC and others - Drop your rates before you ruin the whole economy. Stop focusing on your bonuses...

Posted by: ajoy

Is 8.5% a reasonable interest in current scenario? It is as if some one says....donot be scared...I would slash your throat without pain... Waht these banks are doing. Why donot they understand that we are the same people whom they were giving loan without any trouble! why this shift in attitude now? because people in trouble!!remember banks....our good days and your good days will return again but not the scares you people are inflicting to us in our rainy days!!!!!!!!!!!

Posted by: graham

One thing I have learnt from using HSBC for a mortgage is that I will never ever use them again in any banking capacity - Only 2 1/2 months ago they managed to 'Ease' the current rate of interest to 9.25% - a raise of 1.25% - Thanks for your help! I'm not sure if they have heard about the financial melt down, mass job cuts and general turmoil around the world - Wake up or be left with a mass of defaults! Your choice..

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