Mortgages offered by UAE banks are stabilising at a loan-to-value (LTV) ratio in the 70 to 80 per cent range, bankers told Emirates Business.
The LTV ratio, defined as the loan amount as a percentage of the total value of a property, had reached and in certain cases touched 100 per cent in 2007.
"In most mature mortgage markets customers are required to put in a deposit of 25 per cent to 30 per cent of the value of the property as their commitment to purchase. This acts as a deterrent to speculators who would otherwise enter the market with smaller deposits," said Niranjan Mendonca, Head of Retail Assets at Mashreq.
"The downward correction in LTVs in the UAE will ensure it is serious buyers and end-users who are the actual purchasers."
Sundar Parthasarathy, Senior Vice-President and Head of Retail Assets at Abu Dhabi Commercial Bank, said: "Lending ratios play an important role for a bank in safeguarding its portfolio in a volatile market and indicate its appetite for risk. We offer a competitive lending ratio in the market. However, as market dynamics changes banks will adjust ratios to safeguard their portfolios."
ADCB lowered its lending ratio from 90 to 85 per cent in January. However, RAK Bank has not changed its LTVs since last September. Homi Ghandi, Head of Mortgages and Bancassurance at RAK Bank, said: "We have always been consistent in our lending practices and have always been a prudent lender in the market. We are lending up to 90 per cent of the original price on selected projects in the primary market direct from developers."
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