Noor Islamic sees up to 50% rise in mortgages

Noor Islamic Bank said on Wednesday its mortgage business is 40-50 percent up on the start of the year, a further sign UAE banks are easing lending.

Speaking on the sidelines of the Dubai Property Society, a gathering of real estate experts, Fahd Reaz senior product manager in personal and home finance for Noor Islamic Bank said: “Things have improved from last year, it’s a stable situation. The market has improved.”

Asked whether mortgage lending had risen compared to the beginning of 2009 Reaz said: “Yes definitely. It’s almost 40 to 50 percent higher.”

Anecdotal evidence has shown over the last three months that liquidity is returning to the banking system. In March HSBC increased its loan to value ratios to 75 percent and 70 percent on villas and apartments.

On Wednesday Dubai Islamic Bank announced it would offer 90 percent financing on properties in the UAE.

Noor’s defaults on mortgages were ‘within limit and nothing to worry about’, Reaz said.

The bank’s provision set aside for defaults was ‘within industry limits’ – about three to four percent of its balance sheet, he added, without giving a figure.

Reaz admitted the bank was ‘apprehensive’ about lending to buyers of off-plan properties, which anecdotal evidence suggests have fallen up to 50 percent in Dubai in the wake of the global crisis.

Charles Neil, chief financial officer at Dubai-based broker Landmark Properties, said 30 percent of the group’s total transactions were mortgage financed in May this year, compared to just 17 percent between January and April. Neil said it was critical for mortgage availability to increase otherwise ‘prices could continue to fall’ hurting the UAE property market further.

But he predicted no ‘substantial increase’ in home loan financing in the next two years and predicted house prices would not rise before 2011.

The freehold residential property market in the UAE is worth around AED300bn, with the mortgage market valued at around AED58bn.