Mortgage lending in the United Arab Emirates, which started opening its property sector to foreign investment in 2002, jumped 55 percent in the year to March, central bank data showed on Thursday.

Total home loans at the end of March were worth 64.95 billion dirhams ($17.69 billion) compared with 41.86 billion dirhams a year earlier, the central bank said in a quarterly report on its website.

 Total outstanding home loans grew 10.3 percent from December, the data showed, as demand for properties in the second-largest Arab economy soars during a building boom.

The quarterly growth in home loans slowed from the fourth quarter, when total mortgages jumped 17.5 percent. Year-on-year growth in mortgages also slowed in March compared with December, when total home loans had almost doubled.

The UAE's burgeoning mortgage business has surged since 2002 as the economy expanded on a near six-fold rise in oil prices and some emirates, including Dubai and Abu Dhabi, began allowing foreigners to invest in properties.

Dubai has attracted foreign investors by allowing freehold ownership in many developments, while Abu Dhabi offers foreigners homes on 99-year leases in some areas.

Property prices in the emirate, home to man-made palm-shaped islands, surged 25 percent in the first half of 2008 and are up 79 percent since the beginning of 2007, Morgan Stanley said this week, adding it expected a 10 percent decline in prices by 2010.

Banks have boosted their mortgage offerings, encroaching on the market share of home financers like Amlak Finance, which has been expanding in new markets, including Egypt and Saudi Arabia, as competition intensifies at home.

The UAE pegs its dirham currency to the dollar, which has forced it to track seven US interest rate cuts since last September and pushed down home loan rates across the country as inflation soars.

Inflation has overtaken official lending rates in the UAE, making it cheaper for people to borrow than to keep money on deposit, encouraging investment in real estate, the main driver of the surging cost of living.

Prices rose 11.1 percent in the UAE last year, its highest in at least 20 years, as rents and household costs soared 17.5 percent. -Reuters