|20 November, 2019

UAE property insights: Removing upper age limit for mortgages could spur demand

A circular was issued by the UAE central bank in October remove the maximum age limit requirement as at the time of last repayment.

Dubai Marina skyline in the United Arab Emirates. Image used for illustrative purpose.

Dubai Marina skyline in the United Arab Emirates. Image used for illustrative purpose.

Getty Images/Easyturn

The UAE central bank had issued a circular to banks to make two major changes in mortgages to increase customers' access to the real estate sector. However, most of the banks are yet to implement a key direction, Mortgage Finder revealed.

A circular was issued by the UAE central bank in October to remove the 3 percent early settlement fee for mortgages and the maximum age limit requirement as at the time of last repayment. Though banks soon implemented the former, very few banks if any have made changes to their lending policy to take the later into account.

Prior to the circular issued by the Central Bank, the upper age limit for borrowers was 65 years if employed by a company or 70 years of age if the client was self-employed.

The circular removed this limit and stated that “the maximum age at the time of the last repayment should be determined by the mortgage loan providers in accordance with their risk management and lending policies.”

According to Mortgage Finder, not many banks have amended their lending policies to reflect this change. Most banks opt to retain an upper age limit and only consider older borrowers on a case-by-case basis.

“This is yet another positive move from the UAE Central Bank. We just hope that more banks take it onboard and decide to lift their age restrictions to widen the market and make finance more accessible for older buyers,” Warren Philliskirk, Director at Mortgage Finder said.

There is certainly a market for older borrowers in the UAE.  Data from a leading UAE bank indicates that 44 percent of its borrowers fall into the 30-40 age bracket, 27 percent were in the 40-50 group and 18 percent are 50+.

"Removing the maximum age limit will be positive for the real estate sector. It would trigger a marginal increase in the number of buyers. Even a five percent increase in demand in the market is good. But as far as I know, most of the banks have not yet the changed the maximum age limit requirement," Aron Lomax, managing partner at Treo Homes said. 

"There are a lot of clients around 55-60 who would like to purchase a house. But many are not willing to make the investment as they must clear the mortgage by the age of 65 or the monthly repayments will be very high that they cannot afford to buy it," Lomax added. 

Currently, the maximum mortgage term in the UAE is 25 years, increasing this by just five years would make a dramatic difference.

Philliskirk from Mortgage Finder said: “It would bring down monthly repayments as the finance is repaid over a longer period, which would also help some would-be buyers access to the market by making home loans more affordable.”

(Writing by Seban Scaria; editing by Daniel Luiz)

(seban.scaria@refinitiv.com)

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