Dubai property buyers should not worry about high mortgage rates - Here’s why

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Dubai: Want to buy a property in Dubai or the UAE? But worried that interest rates - and mortgages -  are not dropping fast enough?

Property buyers needn’t be - because banks in the UAE are offering home loans than the prevailing base lending rates in the country. And that works as a significant cost saving for these home buyers at a time when property prices are higher and so are other cost of living parameters.

The lower mortgage rates will be of particular use to end-user investors in the UAE property market. So, how should these investors try and take advantage?

“Banks are willing to forgo profits over the first 2–3 years for longer-term relationships with clients,” said Sawan Karia, Director - Broker Channel at the mortgage consultancy platform Huspy.  “We’ve seen a more aggressive trend where most banks are now lending below EIBOR, with many currently offering rates below 4%.” (EIBOR (which is Emirates Inter-Bank Offered Rate) is the benchmark lending rate between banks in the UAE. When it comes to loans to individuals and businesses, banks lend at EIBOR+.) That mortgages are available at under EIBOR has been a major factor in the fairly brisk demand for home loans in the year-to-date. Looking at it another way, this has played its part in keeping the demand for new homes ticking along nicely in Dubai. (In April, real estate transactions in Dubai had its best month ever.)

“Dubai property market cannot rely on offplan sales to investors only,” said a top official with a leading developer in Dubai. “The market needs to provide enough reasons for end-users to buy and thus shift from being a tenant to a homeowner. “There had been many who were waiting for property prices to stabilize or mortgage rates to come down.  

“In many ways, the home loans are quite affordable.”

The developer is on the ball with what’s needed to get the Dubai property market growing for a fifth straight year. Last three years had been overly influenced by offplan property demand, and in many cases supported by developers offering financial options directly. But there are limits But in any mature property market, you need the end-users and who in turn require help from the banks to make their home buying dreams come true.

According to Huspy’s Karia, the highly competitive less-than-EIBOR rates are available ‘to all buyers, not just first-time buyers’.

The fixed-rate payment options are typically from 1- to 5 years, with some banks offering even longer terms.

“That said, longer fixed-rate tenors typically come at a higher cost,” said Karia. “The most popular choices remain 2- and 3-year fixed rates, as they offer buyers the flexibility to adjust their mortgage depending on how EIBOR moves over time.”

Initially, banks in the UAE were offering the lower-than-EIBOR home loans as part of special seasonal promotions, say, during Eid or end-of-year. Now, that has evolved as banks try to ‘attract and retain customers’ 

“In Dubai, where Huspy facilitates 1 in 4 mortgages, such offers continue to appeal to both new buyers and those seeking a mortgage refinance,” said Karia. 

That’s exactly what the UAE property market needs - an option for potential property buyers to get into the market now. Because having them remain on the sidelines waiting for a cooling off is an opportunity lost. That’s something no market in growth mode - and Dubai’s property market sure is - can afford to lose out on.