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28 March 2024

Personal loans cheaper: Suwaidi

Published
By Staff

A mortgage credit law issued by the Central Bank last week will lead to a decline in rates on personal loans offered by banks operating in the UAE, Central Bank governor Sultan bin Nassir Al Suwaidi said in remarks published on Wednesday.

The law, which set ceilings on mortgage credit to Emiratis and expatriates in the second largest Arab economy, will be enforced a month after it is published in the official gazette, Suwaidi said, quoted by Emarat Al Youm daily.

He said the ceilings, which were approved after negotiations between the central bank and the country’s 51 banks, would help “balance the market and boost liquidity”.

Suwaidi noted that mortgage credit approved by the Central Bank remains within the internationally-recognised limit set at a maximum 20 per cent of the total bank deposits, adding some banks are slightly exceeding that limit and others are far below it.

“The Central Bank has already issued regulations for personals loans involving a list of fees and commissions.

“After the issuance of the mortgage credit law, the interest rates on personal loans are expected to gradually decline,” he said.

“The mortgage law will be enforced after it is published in the official gazette, but we have decided to give banks a one-month grace period to comply with it.”

Emarat Al Youm quoted Suwaidi as saying a liquidity law would be issued within less than a month while a law on banks’ exposure will be enforced within a week.

Under the mortgage credit rules issued by the Central Bank last week, the 23 national banks and 28 foreign units will be allowed to provide a loan of up to 80 per cent of the property value to Emiratis and 75 per cent to expatriates.

The Central Bank also told banks not to give loans that exceed 50 per cent of the client’s monthly income while the loan to UAE nationals must be cut to a maximum 70 per cent in case the property value is above Dh5 million.

Loans to expatriate clients must not exceed 75 per cent of the property value of Dh5 million or less and 65 per cent if the property value is more than Dh5 million.

As for clients buying property before construction or on the map, the maximum loan they can get is 50 per cent of the unit’s value.