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UAE changes bank rules for Emirati mortgage holders

Luxury Skyscraper In Dubai Bugatti Residences/ Reuters Connect
UAE banks can now reclaim up to 60% of salaries for mortgage repayments for UAE citizens earning more than AED40,000 a month
  • UAE’s Central Bank increased mortgage repayment cap for high earners
  • Banks cannot extend loan terms to make up for interest
  • Lower earners’ repayments remain capped at 50% of salary

The Central Bank of the UAE has introduced new mortgage repayment rules for citizens this week as a response to rising interest rates.

Customers who have a monthly income of AED40,000 ($10,890) or more will now have their mortgage repayments capped at 60 percent of their present salary. Banks were previously only allowed to deduct 50 percent.

While this salary cap for higher earners has increased, banks must bear the remaining uncovered interest due and are not allowed to extend the tenure of the loan.

For UAE mortgage customers with a monthly income of less than AED 40,000, banks can still only deduct a maximum of 50 percent for mortgage repayments.

Lenders are, however, allowed to extend the repayment terms to cover the increase in interest rates, up to a maximum of 30 years.

The Central Bank last month maintained interest rates after the US Federal Reserve board announced it was keeping the key borrowing rates unchanged. The base rate applicable to the overnight deposit facility was held steady at 5.15 percent.

The Fed is set to meet later this month with experts split on whether a further rise in interest rates will be on the cards following what could be a temporary respite.

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