Mortgage industry makes major gains, faces challenges in 2008

"The UAE mortgage industry is certainly in a different place than it was a year ago. It has been tested with various challenges and as a result, has matured and become more resilient."

said Chris Dommett, CEO of John Charcol Dubai.

In 2008, the industry made gains in building a stronger regulatory framework, with the introduction of a new mortgage law ensuring greater protection for both borrowers and lenders.

Under the new law, new mortgage contracts must be registered with the Land Department, helping protect both parties in case a contract is breached.

This year also saw good progress made by the national credit bureau Emcredit, which will help to bring greater transparency and confidence to the market with a credit verification system designed to help financial institutions make quicker and more informed lending decisions.

Despite this, many banks were forced to tighten their lending conditions dramatically in the midst of a global liquidity crisis, scaling back their loan to value ratios and raising salary requirements for potential borrowers.

These measures had an immediate impact on the local real estate market, dampening the demand side of the equation and leading to a price correction.

In a bid to increase the industry's lending power and inject greater stability to the market, two of the largest lenders in the UAE, Amlak and Tamweel, announced their intentions to merge, a milestone that will allow the new lender to tap into new sources of funding and change the direction of the industry in 2009.

It is vital for the speedy recovery of the market for this new entity to resume lending as soon as possible.

The formation of Abu Dhabi Finance should also give the industry a boost, particularly in Abu Dhabi where they will initially concentrate their business.

Although the fourth quarter presented challenges for the mortgage industry due to lending restrictions and caution among buyers, Dommett believes that both the property and mortgage industries will stabilize in the coming year.

"While the recent shift in market conditions has made it difficult to predict the growth of the market for the first quarter of 2009, I think we can safely say that the long-term outlook for the industry remains stronger than ever," said Dommett.

Against the backdrop of an increasingly complex UAE mortgage market, John Charcol, the UK's leading independent mortgage advisor, launched operations in Dubai, becoming the first consultancy of its kind to be granted a license to practice its services in the region.

Since then, mortgage brokers such as John Charcol Dubai have helped consumers simplify the entire process by helping them evaluate the pros and cons of the numerous mortgage products available.

John Charcol Dubai works closely with the country's leading financial institutions, property developers, and estate agents to bring speed and transparency to the UAE's property buying process.