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Home loans could be easier next year

If you’re looking for a mortgage, 2017 could provide ideal conditions for homebuyers, say UAE experts

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Real estate analysts forecast strong demand for property and consequently, mortgages, from buyers in 2017

Many consumers in the UAE feel now is the right time to buy property, according to a report by financial comparison website Compareit4me.com. That might be good news for the real estate market, but how easy is it to get the necessary financing?

“There has been plenty of talk around banks tightening their credit controls in the UAE and while that may be true in some cases, we haven’t noticed that it’s as bad as some reports are making out,” says Jon Richards, CEO of Compareit4me.com.

“Certainly, plenty of people are looking for mortgages — our latest report noted a 119 per cent year-on-year increase in the number of people searching for home loans on Compareit4me.com. And while not all of those searches translate into applications, and subsequently approvals, we’re hardly inundated with complaints from consumers complaining that their mortgage applications are being declined. If anything, we’ve had really good feedback.”

Buyer-friendly rates

While it might be easier than ever to find the most suitable mortgage, current interest rates are also promising.

“Interest rates for mortgages in the UAE are attractive right now,” says Rohit Garg, Head of Business Banking, Mortgages, Deposits and Remittances at Mashreq.

“Mashreq is offering 2.99 per cent for the first year if you transfer your salary, which is an attractive rate given that the rents are in the range of 5-8 per cent of the capital value. However, it is likely that the interest rates will rise during the course of next year due to the probable increase in interest rates in the US. So it is a great time to lock in a mortgage at low interest rates. We don’t see the bank lending going down in 2017 and it may actually go up in the medium term.”

It’s not surprising to see why lending may rise next year. “Given the low interest rates and prevailing high rents, many residents are thinking about owning a property in the UAE,” explains Damodhar Mata, an independent financial adviser who blogs on Financialplanning.ae. “Although interest rates are expected to go up, they will still be competitive and buying over renting will be a good option.”

Encouraging forecast

Pawan Dhawan, Head of Home Finance, Noor Bank, says, “According to real estate analysts, forecasts of improved sales of properties in Dubai, starting early 2017, will boost demand for home finance from buyers.

“Looking at the outlook in the run-up to Expo 2020, several banks are gearing up to meet increased interest in this sector by offering a range of flexible home finance solutions for its clients across segments. We have witnessed several new products surface in the market such as Flexi Home finance, a profit-only product launched by Noor Bank and deposit-linked products that are still very new and in the testing phase.”

Islamic finance is certainly a product to look out for in the coming year. “We’ve noticed an increase in the number of people searching for Islamic finance mortgages and we expect that interest to intensify over the next year as more non-Muslim people wake up to the benefits of Islamic finance,” says Richards.

“More generally, we expect to see more people take on mortgages in 2017. The property market is favourable, with plenty of new housing developments coming online next year, and there are more long-term residents now looking to put down roots in the UAE. Couple this with the fact that mortgages are by and large becoming more easily available to people with good credit records, and we think the trend for mortgages is going up.” 

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