ADCB slashes lending rates

Abu Dhabi Commercial Bank reduces rates in move that may spur property prices and inflation.
ADCB slashes lending rates
By Reuters
Wed 20 Feb 2008 05:44 PM

Abu Dhabi Commercial Bank, the emirate's third-largest lender by market value, said it was cutting its base lending rate by 150 basis points to 4% in a move that may spur property prices.

"The ADCB Retail Base Rate (RBR) is reduced from 5.5% to 4%, effective March 1," the bank said in a text message.

"Your revised mortgage loan schedule will be sent to you shortly."

ADCB typically charges home owners 2.5 percentage points more than the RBR.

HSBC Holdings said earlier on Wednesday that negative real interest rates of minus 8% - where inflation is higher than deposit rates - is likely to support the UAE property market for at least the next two years.

"The current housing shortage is here to stay at least until 2010," the bank said. A Dubai property crash was "unlikely," it said in a report.

Emirates NBD, the Gulf's largest bank, said on Monday it expects to almost double its mortgage lending this year as lower interest rates encourage home buyers. That could fuel inflation already at a 19-year high.

Lenders in the UAE, one of five Gulf oil producers that peg their currencies to the dollar, are lowering interest rates for homes loans as the central bank mirrors cuts in the US.

Mortgage lending in the second-largest Arab economy, which opened its market to foreign investment in 2002, almost doubled in the year to September to 43.68 billion dirhams ($11.90 billion), central bank data showed on Monday.

The US started cutting rates on September 18.

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