The regulator said that banks should not provide personal loans for longer than four yearsby Bloomberg
The UAE is cracking down on the misuse of home loans to prevent risky borrowing as an ongoing property slump weighs on banks.
The Central Bank of the UAE (CBUAE) issued a notice to lenders to stop certain unacceptable practises involving mortgages, which enabled some borrowers to use home loans for purposes other than constructing, purchasing or renovating a house for owner occupier or investment purposes.
CBUAE said, “Any form of personal loans granted by banks or finance companies using property as collateral should not be classified as mortgages.
The regulator added that banks should not provide personal loans for longer than four years and lenders must not take private houses as security for this type of borrowing.
The measures come as banks in the UAE are at risk once again as the property market endures its longest decline since a 2014 peak and non-performing loans (NPL) rise. The situation is prompting some lenders in the second-biggest Arab economy to ease payment terms by extending loan maturities and lowering interest rates.
Business growth has stalled in Dubai while jobs have disappeared at the fastest pace in at least a decade in the latest signs of strain on the Middle East’s commercial hub.