* Response to December circular capping lending
* Rules aim to stop future real estate bubbles
* Cover many aspects of residential mortgages
* Could be introduced in six to nine months
ABU DHABI, Feb 6 Banks in the United Arab Emirates have proposed amendments to rules capping mortgage lending which aim to prevent bubbles from forming in the real estate sector, a banking industry body said on Wednesday.
Real estate prices in the UAE, particularly in Dubai and Abu Dhabi, collapsed after the bursting of a bubble in 2008, with prices falling more than 50 percent from their peaks.
At the end of last December the central bank unveiled limits on residential mortgage lending. The announcement caused a furore in the industry as many bankers felt the curbs would stymie a nascent recovery in property prices, and complained that the rules were introduced without warning - though the central bank subsequently said they were merely a starting point for discussion.
The Emirates Banks Association said in a statement on Wednesday that it had submitted a unified proposal to the central bank on Monday following discussions with member banks.
Proposals relating to loan-to-value (LTV) ratios were in line with those outlined by EBA chairman Abdulaziz Al Ghurair last month; the EBA wants lending for first homes capped at 80 percent for UAE nationals and 75 percent for expatriates.
The LTV for subsequent homes would be 65 percent for UAE nationals and 60 percent for expatriates.
The original central bank circular had said mortgage loans for foreign individuals should not exceed 50 percent for first homes and 40 percent for subsequent ones, with the caps for UAE citizens set at 70 percent and 60 percent.
The EBA also made proposals this week relating to maximum financing, which would be limited to eight years' salary or total income for citizens and seven years for expatriates, as well as length of mortgages, which would be capped at 25 years.
Other areas addressed included making repayments directly linked to salary or other verifiable regular sources of income but excluding end-of-service benefits, as well as collateral, interest and fees.
The central bank said last month that it now planned to introduce new rules for the mortgage industry in about six to nine months. (Reporting by Stanley Carvalho, Editing by David French and Andrew Torchia)
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