Borrowers with loans linked to the floating rate have the option of switching to a fixed rate mortgage, but they need to check with their respective lenders if there are hefty fees involved. A couple of lenders in the UAE are starting to introduce the fixed rate concept, tempting borrowers with attractive interest rates. Just last week, Barclays introduced its new fixed rate mortgage, offering UAE homebuyers with an interest rate as low as 5.99 per cent that can be locked in for up to three years. The bank said the new product will give homebuyers the added security of knowing how much their monthly repayment will be during the fixed rate period, enabling them to budget and plan ahead. Mark Elliott, director of sales at Barclays UAE told Gulf News that the product is also available to their existing customers and to those who have mortgages elsewhere.
For the banks' existing clients, switching to the new product means they have to pay a processing fee of Dh2,500.However, for those who have pending home loans with other banks, they are advised to check their lenders' policy first before initiating a switch or a remortgage, and find out whether a fixed rate can save them more money.
Other sources said that bailing out of a mortgage can be very costly and that fixed rates tend to be higher as loan to value ratios increase."The biggest drawback for a client in this market is that switching penalties are at three per cent, this leaves the customer at a disadvantage as he has no option to switch away from the lender to another lender for a better fixed rate which is the norm in more mature markets," Heinrich Kritzinger of Candour Consultancy told Gulf News.He noted that lenders in the UAE try to "protect their books" by charging hefty exit and overpayment penalties.
"This is a trend which is understandable given the uncertainty in the UAE mortgage market," he added.
Barclays said the introduction of a competitive priced fixed rate mortgage product will also provide an opportunity for a greater number of homebuyers to own a home.The bank's fixed rate mortgage offers customers to benefit from a maximum loan to value of 75 per cent. The minimum mortgage term is five years and the maximum is 25 years. After the fixed rate period, however, the interest rate will revert to the prevailing "Barclays mortgage rate."
