Abu Dhabi: Government-controlled Abu Dhabi Finance Company (ADFC) on Monday said it is cutting its lowest interest rate on mortgages to 5.75 per cent after recently gaining access to low-interest bank loans and government funds.
"We've always said interest rates were too high," said ADFC Chairman Ali Al Mehairi.
"Now we're in a position to offer lower rates to our new and existing customers."
For existing borrowers, the new rate means savings of Dh2,400 to Dh3,200 per month, depending on their original rates.
Al Mehairi said all borrowers contracts stipulate a rate review every six months, during which all will be eligible for the reduction depending on their credit profiles.
Prior to the rate adjustment, ADFC's lowest rate was 8.25 per cent, compared to the market's lowest rate of 6.5 per cent.
Now ADFC's highest rate stands at 8.5 per cent.
The company is the emirate's only specialised mortgage lender with a loan book of just under Dh1 billion as of the end of 2009.
With the continued instability of government-owned Amlak and Tamweel, ADFC has stepped in with offers such as 30-year mortgages and an age limit of 70 at loan maturity to capture market share.
The company is 52-per cent owned by Mubadala with the rest of shares split among Sorouh, Al Dar and Abu Dhabi Commercial Bank.
Since its launch in Nov-ember 2008, ADFC has not had a single default, Al Mehairi said in an interview yesterday.
He said his company relies on its own credit rating techniques to determine the credit worthiness of applicants.
ADFC relies on the Abu Dhabi property market for most of its business, capturing 30 per cent of the emirate's mortgage applications in 2009.
"We've been fortunate," said Al Mehairi. "But we are prepared to deal with defaults in the future."
A Dubai court issued a rare ruling in January allowing Barclays to foreclose on several defaulting properties, a development that could encourage other lenders to follow suit to recover a portion of their losses in the emirate's troubled real estate market.
Al Mehairi said ADFC's long term expansion could see the company venture into surrounding emirates and outside UAE, as well as offer new products such as small project financing, but is now focused on establishing itself in Abu Dhabi's housing market.
The UAE mortgage industry soared 123 per cent to Dh126 billion in total loans in 2008, according to figures provided by the Central Bank.
Through August 2009, mortgages totalled just Dh140.5 billion as banks grew more conservative in the face of rising non-performing loans.