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The US Federal Reserve has signalled there will be further rate hikes this year. But property buyers in the UAE needn't worry - there are still accessible home finance deals available. Image Credit: Bloomberg

Dubai: Planning to buy a home in the UAE? And worried that the latest interest rate hike - and chances of more to come - will be an extra burden if you take out a mortgage?

You needn’t be, according to a top official with the mortgage-focussed fintech Huspy.

“We must remember that the UAE not only has some of the most competitive property prices among global cities, but the interest rates are very attractive,” said Fouad Chemlati, General Manager for Mortgages at the Dubai-based company.


“In the US, for example, the average interest rate for a 30-year mortgage is over 7 per cent right now.

“The UAE market had already priced in the interest rate increases. That’s why with the last two rounds of (by US Federal Reserve and repeated here) hikes, we actually saw interest rates being reduced, benefiting homebuyers.

“Right now, the lowest 3-year fixed mortgage available is 4.24 per cent. On average, interest rates are at approximately 4.7 per cent for residents and 5.14 per cent for non-residents.”

UAE banks in mortgage over-drive

Local lenders are spreading the word among prospective property buyers, especially end-users and who need mortgage support to get the deals done.

Their messaging is straight-forward enough - lock in the initial payment period, of three to five years. During this period, at some point, the central banks would start cutting down on rates, which would ease the payment obligations for homeowners.

Affordable access to home financing will continue to drive demand for property ownership in the UAE, whether people are looking for a home to live in or as an investment.

- Fouad Chemlati of Huspy

To smooth out property buyer concerns even further, some UAE banks are even testing out fixed-rate only mortgage financing. Anything to keep the UAE property boom going for longer… According to banking and real estate sources, UAE banks did not waste any time putting together mortgage financing packages that could convince a potential property buyer to go ahead with the transaction.

“Because any deal that gets put off because of lack of mortgage support or buyer concerns about the cost of servicing the loan is a lost deal,” said an estate agent. “Apart from a brief period during Q4-2022, UAE banks have been proactive in making the deals stick.”

H1-2023 numbers confirm it

Mortgage appetite during the first six months has been quite healthy, even with the 10 rate hikes since March 2022. This is why there is no lack of confidence among bankers that the trend will continue deep into this year. Even with yesterday’s additional 0.25 per cent hike - and the Fed saying they are not done with the increases.

What does all this mean for a home loan?

“Right now, for instance, a Dh1 million mortgage over 25 years at a rate of 4.75 per cent on the capital and interest would cost Dh5,702 per month,” said Chemlati. “With the 0.25 per cent increase to 5 per cent, the same mortgage would cost Dh5,845 - or an additional Dh143 every month.

“Since March 2022, the Fed has increased rates to 5.5 per cent across 11 rate hikes. While this meant an increase in monthly payments for homebuyers, it also encouraged many to take a leap towards ownership and ahead of future hikes.

“For homeowners in the UAE, the 3-month EIBOR was 0.56 per cent in March 2022, a difference of 4.8 per cent currently, which equates to Dh4,000 per month on Dh1 million over 25 years.”

Clearly, today’s property buyers in the UAE are willing to take that in their stride…