The closing months of last year were dubbed the Empty Quarter by mortgage companies, such was the dearth of business.

But the darkest times could be behind lenders, who are now reporting an increasing number of enquiries from people interested in buying property.

And most people expressing interest in buying property are professionals in the mid- to high-income bracket keen to take advantage of lower house prices.

But significant hurdles remain – with most lenders introducing strict criteria for applicants to meet, in a move to limit their exposure to an unsteady real estate sector.

"The last quarter of 2008 was the Empty Quarter as far as buyers were concerned," said Omer Ghani, CEO of Fine & Country UAE. "However, since mid-February we have seen a significant increase in the number of inquiries about buying."

The trend was confirmed by HSBC, although the bank is offering finance only to customers who fully meet its eligibility requirements.

Abdulfattah Sharaf, CEO of Personal Financial Services at HSBC Middle East, said: "We are witnessing challenging times and the housing market has been at the centre of the storm.

"As a result we are going to see more prudent lending standards around the world and buyers will now have to meet more stringent requirements in order to procure home loans.

"It is important that our products and services are sustainable for the bank and the customer. Our current loan-to-value (LTV) ratios across our approved list of properties will help to ensure that customers receive loans that they can afford to repay at a time of considerable uncertainty around the world."

HSBC restructured its mortgage criteria this month and dropped its LTV ratio from 70 per cent in February to 60 per cent. The bank also raised its variable interest rate from 7.25 to 8.25 per cent.

Ghani said clients who were financially stable with a secure job, little debt, adequate income and cash available for equity were able to obtain mortgages.

"However, financial institutions are spending more time carrying out due diligence on prospective mortgagees, therefore the length of time needed to get a mortgage is now longer."

Jesse Downs, Director of Research and Advisory Services at Landmark Properties, said lenders had tightened their criteria and imposed restrictions in order to lower the risk of default.

"For example, many banks now look at a customer's career field, not just their salary," she said. "People working in the property sector will have a harder time getting a mortgage, as will middle-income earners.

"In addition to income, LTV ratios depend on the profile of the developer, with banks tending to prefer quality oriented, government-backed ones or those with strong local ties. Furthermore, some lenders have exclusive agreements with developers to fund customers for specific developments."

Downs attributed high rental yields as a reason for the recent rise in mortgage enquiries.

"Yields are still high since rents have fallen less than sale prices," she said. "Another reason is bargain hunting – some end-users see in today's low prices an opportunity to either upgrade to higher quality properties or move from renting to ownership."

Sharaf said most buyers in the region required a loan to close the gap between the deposit they had saved and the purchase price of the home they wished to buy.

"In today's environment this gap is bigger as most lenders have reduced their LTV ratios," he said. "Mortgage seekers should pay special attention to the finance terms.

"Take time to consider the penalty clauses of your mortgage agreement – what you could pay if you exit your loan early, make early payments or miss payments. The cheapest home loans can come with strings attached, particularly those with fixed, discounted or capped rates. So the headline rate may look attractive but you could pay a hefty fine for settling your loan early."

Ghani said it was important to keep a home over the long term. Most people could ensure this was possible by understanding the cash requirements of servicing their mortgage and the nature of the loan they were taking out.

"Review your personal financial situation very carefully and do a 'worst case' scenario factoring a loss of job or reduction in salary. Assuming a drastic reduction in personal income and then calculating whether you could still service the mortgage enables one to have a good idea about the long-term sustainability of keeping the home. Also speak to a mortgage expert who can explain all the fine print in the various mortgage types available in the market."

Downs said borrowers should carefully consider their medium to long-term financial and employment prospects to avoid over-extending themselves. Lending volumes, however, remained abysmal and global economic conditions were likely to delay any improvement until the end of 2009.

"Recent government initiatives may improve the overall availability and effectiveness of financing," she added. "In the short term lending policies will remain highly restrictive and the cost of borrowing is likely to remain high.

"Macro-economic conditions are unlikely to begin improving until the fourth quarter of this year, when banks are likely to resume lending at higher volumes and lower interest rates."

The proliferation of selective lending barriers by banks has severely restricted the availability of credit, which is essential for rehabilitating property sales. Lenders will correct this behaviour only when banking confidence is restored.

Likewise any improvement in investor confidence will coincide with a decision by the banks to ease approval criteria and resume lending at attractive interest rates, favourable LTV ratios and lower capital costs.

Recent data shows that in most instances, those currently gaining approval for new loans are in the mid to high-income bracket – above Dh20,000 per month – with low levels of existing debt and one year or more of employment history.

Sharaf said that further customer choice would be the key as the UAE real estate market moved forward.