By Claire Ferris-Lay
EXCLUSIVE: Lenders in UAE reduce loan to value ratios amid global credit crunch.
UAE banks and home finance firms have cut their loan to value ratios by as much as 25 percent as the global credit crunch continues to tighten its grip on regional markets.
Tamweel and Amlak, the biggest Islamic mortgage lenders in the UAE, have both dropped their loan to value ratio in the last two weeks. Tamweel has lowered its maximum amount from 90 to 75 percent while rival Amlak has dropped its loan to value ratio from 90 to 65 percent.
“The base case has always been between 70-80 percent and anything in the 90 percent range was on a promotional basis, we have now stopped the promotion,” Nabil Alwan, head of marketing & product development at Tamweel told Arabian Business.
The deepening global credit crisis has forced governments to bail out banks as liquidity dries up. Last week the US approved a $700bn plan to prop up its financial institutions while the UK today announced that its own banks would get an $87bn lifeline. Last month the UAE central bank pumped $13.6bn into the UAE banking system in a bid to ease the impact of the liquidity crunch.
Lenders are lowering mortgage rates as credit tightens and home price growth slows.
In September HSBC Middle East lowered its loan to value ratio from 80 to 70 percent. Lloyds TSB, which currently lends a maximum of 80 percent against villas and 70 percent against apartments, has said it is reviewing its loan to value ratio in line with its international mortgage offerings.
“Having reduced our loan to value ratio on our international mortgage in line with the changing global market conditions, we are currently reviewing our local mortgage offering to further ensure customers are protected and able to repay any borrowing extended to them,” said Richard Hextall, head of personal banking at Lloyds TSB Middle East.
Emirates NBD, the Gulf's largest lender by assets, on Wednesday announced it would offer fewer large loans and long-term repayment schemes in a campaign to encourage responsible lending after the global credit crunch.
“Large loan amounts and long repayment periods that can place a considerable strain on the borrower will be minimized through this process,” the bank said in a statement on its website.