The Emirates Banks Association (EBA), a lobby group, is aiming to water-down planned restrictions on mortgage lending and has proposed limiting borrowing to 75 per cent of the value of a property for expatriates in the UAE.

The move comes in response to a notice from the Central Bank of the UAE on 30 December 2012 that proposed a limit of 50 per cent for expatriates and 70 per cent for UAE nationals.

The EBA’s proposal is for a 80 per cent cap for nationals. For second homes, it suggests the limits should be 60 per cent for expatriates and 65 per cent for nationals. Abdulaziz al-Ghurair, chief executive officer of Dubai’s Mashreq Bank and chairman of the EBA, says the lobby group is still in negotiations with the central bank about the new mortgage rules, but the regulator plans to introduce the rules in the second half of the year. The central bank is also considering limits on the tenor for mortgages, with the EBA saying it supports limits of about 25 years.

The EBA is also discussing the possibility of introducing limitations to mortgage lending on properties still under construction to curb speculation.

Al-Ghurair added that the regulations should be “dynamic and not a specific policy” so that if the real estate sector overheats they can be tweaked to either dampen or stimulate the sector.

Mortgages are currently a small part of home purchases in the UAE, with about 70 per cent of transactions being cash-based.