Mortgage default rate grows by 25% in six months

Mortgage default rates in the UAE could have gone up by almost 25 per cent in the past six months, according to analysts.

"I have no doubt that we have seen increases in home mortgage defaults over the past six months," Chris Green, Managing Director at Independent Finance, a specialist financial services company, told Emirates Business.

"We will see more than five per cent of mortgaged homeowners being more than 30 days late on their payments and this will have increased by more than 25 per cent from last year," he said.

A vast majority of property purchased in the UAE is financed through retail mortgages, part of an industry that was worth Dh87.6 billion in 2008, according to figures released by the UAE Central Bank, as quoted by Abu Dhabi Finance company.

And banks agree that the situation is only expected to become worse in the coming months.

"We will no doubt see stresses in mortgage portfolios emerging, and there are players who are in trouble because of falling property prices," said Venkatesh Srikantan, Regional Head of Assets and Liabilities at HSBC.

Niranjan Mendonca, Head of Retail Assets at Mashreq, said it is a bit premature to assess debt defaults over the next few months. "After the summer holidays, we go straight into Ramadan and these traditionally have been periods of lesser activity so it would be premature to make any forward looking statements," he said.

Moreover, collective NPLs of UAE banks take a bit of time before they're made public. "Unfortunately, NPL breakdowns are not publicly available and defaults will depend on payment plans for each development," said Giyas Gokkent, Chief Economist at National Bank of Abu Dhabi.

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