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Bank raises expat salary limit for loans by 200%
Emirates NBD, the largest bank in the Middle East, has hiked the minimum salary limit for expatriates seeking a mortgage by more than 200 percent and doubled the threshold for locals, Arabian Business can reveal.
In a tightening of its lending policy, the bank, which was formed by the merger of National Bank of Dubai (NBD) and Emirates in 2007, is only considering expatriate customers for a home loan if they earn a minimum of 25,000 dirhams ($6,800) a month, up from a previous limit of 8,000 dirhams.
Emiratis must now earn 20,000 dirhams a month, up from 10,000 dirhams.
A spokesman for the bank refused to comment on Wednesday, but added: “These [lending policies] are regularly changed according to market conditions.”
The change in lending policy from Emirates NBD, which was introduced last month, will exacerbate the problem of mortgage availability in the UAE, making it even harder for low to middle income earners to secure financing to buy a home.
It comes two months after an internal Emirates NBD email was leaked to Arabian Business which stated that the bank was suspending loan facilities to all expatriate employees of real estate companies, who are currently laying off thousands of staff due to a slowdown in the industry.
Emirates deny this is company policy, despite sources inside the bank who have repeatedly told Arabian Business that the decision to not to lend to expats at property companies is still firmly in place.
Other banks in the UAE are reigning in their lending criteria as well. In November, it emerged Lloyds TSB had raised the monthly salary limit for a personal loan from 12,000 dirhams to 25,000 dirhams.
In the same month, HSBC doubled the minimum salary someone must earn to qualify for a mortgage from 10,000 dirhams to 20,000 dirhams.
The UAE government has moved to ease the liquidity situation. At the end of Sept, the UAE Central Bank unveiled plans to pump $13.6 billion into the banking system. Three weeks later, an extra $19 billion cash injection was announced.
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Posted by Dan, Stockholm, Sweden on 15 January 2009 at 18:06 UAE time
This makes sense. Most of the economy was based on real estate and it went bust. Most people used to work in real estate or businesses supporting real estate. They know it will not recover for a long time and a lot of people will lose their jobs. This limit is just for show. No matter how much your salary, you will not get a loan. We all know the reality, so we should not be surprised.
Would you give loans in these circumstances? Especially when the banks don’t have a dirham?
Posted by ABC on 15 January 2009 at 16:32 UAE time
Just today I had ADCB calling me to offer me an amazing deal.. :) tie up my savings with them for 6 to 12 months and get 6 or 7% returns (subject to change at banks discretion(obviously only downwards then)) Only a short while ago before the bubble burst and they were over leveraged on real estate deals, they turned me down for a car loan of 100k on the basis that my FZE company was 11 months old not 12 months old, all this despite having 100k in a 12 month fixed term deposit and more than 200k in other accounts... needless to say I closed business, staff and a couple of personal accounts with them over the issue (they lost 5 accounts in total leaving only one current account standing)
Now they are crying out for deposits so they can lend/recover bad debts... what a shame the loans system wasn't based on credit history/customer profile rather than the standard 6 month salary transfers..
I for one will loose no sleep over their new dilema
Posted by Malik, Jeddah, KSA on 15 January 2009 at 14:48 UAE time
I thik by doing this they are going to kill the real state market which represent a new important economic sector for UAE. This is will make it more difficult/impossible for the end users to purchase a home.
My mortage provider Amalk increased my interest rate starting Jan 2009f rom 7.75% to 9.75% (imagine 2% increase) while the interest rate are decreasing around the world.
Posted by stuart mayhead, Dubai, UAE on 15 January 2009 at 14:44 UAE time
What we have now all learnt is that the banks actually went bust and were kept afloat by the initial Government loans. The banks then prioritised their own balance sheets and have set about securing their own commercial future. Part of this future will be achieved by reducing the risks that they take. Only once they feel that they are on safer ground will they start to lend in large amounts again. The UK Government has realised that they need to 'cover the risk' for the banks and have offered to guarantee the loans. Hopefully this will enable the banks to increase their exposure and lend more money. However what is important here is that we are in new territory and we are all learning as we go. Let’s hope we get it right!
Posted by TurkishGuy, Dubai, UAE on 15 January 2009 at 13:25 UAE time
What is the sense in not giving out loans to people who earn a steady income but less than 25000? Does it mean that if someone is making 25000 thousand or above his job is completely secure and he will never be a defaulter?
The amount of loan should be a percentage of the annual income of a person. Therefore, any salaried person should be eligible for a loan but the amount should depend on their income.
If you rule out anyone below 25000, you will wiping out a huge percentage of your potential customers. At a time when the economy requires stimulus, and financial institutions are given low-cost credit lines from the government, these steps cannot be the decisions of a wise-mind. These are decisions taken without ind epth thinking about their consequences both in short and long term with a panic state of mind.
Increasing the interest rates, making it more difficult to borrow will definitely halt an economy that is already slowing down dramatically.
If you want to stimulate the economy, encourage people to spend, you should give them the means.
Posted by Potential U.A.E. resident, London, United Kingdom on 15 January 2009 at 12:53 UAE time
I have been travelling to the U.A.E. regularly, for 10 years and now have an opportunity to join a company in Abu Dhabi full time, but I am stuck between a rock and a hard place.
My modern 5 bedroom house in the UK has been on the market since August 2007, since when we have had just two, ludicrously low, offers by 'vulture capitalists'.
For me to rent a decent 2 bedroom apartment and car in Abu Dhabi and part pay my UK mortgage, I need around AED 30,000 a month, despite having an additional private pension income in the U.K.
The property market in the U.K. fell last year by 16% on average - more in some regions.
Not only will property crash by at least 20% in Dubai in 2009 (perhaps less in Abu Dhabi), it needs to crash, if the country wants to encourage qualified European executives to replace those who will, inevitably, be leaving.
The only good news is that my UK 'tracker' mortgage will fall to an incredibly low 1.99%, at the end of this month.
Posted by Homa Farley, Abu Dhabi, U.A.E. on 15 January 2009 at 12:37 UAE time
Surely the people who are more likely to borrow are the ones who are on a lower salary. What is the point in making their life hatder.
Posted by business, Dubai on 15 January 2009 at 11:39 UAE time
You have to consider the point of view of banks as well....
Imagine the banks never used to provide mortgages or loans. would you have even got a house ?
Imagine that tomorrow the bank gives you the money and you lose your job in a time when finding a job has never been harder how will the bank get its money back?
The problem in the UAE is that banks spoiled the public making it so simple to get financing for anything a person wants to buy.... up to 100% which is very rare anywhere arround the world.
What is worst is that media and people in the UAE are acting as if the UAE is the only place in the world which is facing the Global Financial crisis. Try and get something out of a bank anywhere arround the world now....
Posted by Khalid, Dubai, UAE on 15 January 2009 at 11:14 UAE time
Its good to see that the local banks in the UAE are finally shedding their cosy lets read a book by the fireplace image.
Lets face it , if you cant afford to buy your home cash who wants you as a customer anyway you will always be in debt and a liability .
At the moment there are 1500 - 2000 visa's being cancelled a day by the labour department , how many of those people will probably have credit cards or small loans maybe even mortgages , do you think they will repay what they owe before departing the UAE , I dont think so.
Happy new year to the Banks what goes around come around.
Posted by Lee Mancini, Dubai, UAE on 15 January 2009 at 10:40 UAE time
Surely the Government should get involved as this completely kills off the property market. They give the banks money to help the credit crisis but then do nothing when the banks stop lending.