UAE Central Bank Eases Home Loan Burden Amid Rising Rates

CBUAE Introduces Measures to Alleviate Impact of Rising Interest Rates on Home Loans

Effective from July 1, 2023, the measures encompass all residential real estate loans, including those with increased Debt Burden Ratios (DBRs) where interest payments have not been deferred until after repayment, as well as loans with non-increased DBRs where interest incurred due to higher interest rates has been postponed , To support customers with a monthly income of Dh40,000 or more, banks are allowed to exceed the currently regulated rate of deduction from salary or income, which stands at 50 percent. They can cover the increase in interest rates up to a maximum of 60 percent, while the banks themselves will bear the remaining uncovered interest without extending the loan term.

CBUAE Introduces Measures to Alleviate Impact of Rising Interest Rates on Residential Real Estate Loans for UAE Nationals

For customers earning a monthly income of less than Dh40,000, banks have the flexibility to extend the repayment period to account for the rise in interest rates, up to a maximum of 30 years. However, the deduction from salary or income remains at the existing rate of 50 percent. Similar to the previous scenario, banks will bear the uncovered interest resulting from the increased rates , The issuance of this notice follows the approval of a series of measures by the CBUAE Board of Directors. The objective is to ease the burden of increased interest rates on residential real estate loans for UAE nationals. These measures were formulated based on a comprehensive study conducted by the Central Bank, in collaboration with several banks, and after consultations with the UAE Banks Federation to assess the impact of high interest rates on bank assets, investments, and customers.