Rising rates in the UAE: Property buyers are looking for ways to reduce the burden of mortgage payments – they have options


Dubai: Time is running out for prospective property owners in the UAE who want to secure a mortgage; if they wait until the end of the year, they will probably face an impact of more than 7%, compared to around 5% currently.

Mortgage property transactions in Dubai have fallen significantly from last year’s levels, and the three interest rate increases in the United States and the United Arab Emirates of 1.50% since March have not assistance. But those who have decided to invest in a house and are financed by a bank cannot wait to close the deal.

Already, starting in May – when there was a 0.50% increase in interest rates – there was a marked increase in inquiries from lenders about housing finance programs. These owners were trying to obtain a “better” offer before the announcement, on June 15, of another increase, this time of 0.75%.

So what should future homeowners aim for in their mortgage transactions?

Try to compensate

It is at this time that the purchaser opens an interest-bearing savings account with the bank with which he has taken out a mortgage loan. “The interest paid on the savings account would be at the same rate as the mortgage,” said Michael Hunter, co-founder of mortgage advice platform Holo. “Clients can essentially offset the interest earned on their savings against what they owe for their mortgage payment. This means that more of the principal is paid on a monthly basis, which reduces the term of the loan and, by default, reduces the interest rate paid. (Note: Not all mortgage lenders in the UAE offer offsetting savings accounts.)

According to Hunter, such an interest-bearing savings account helps generate returns from the funds. “For example, if you borrowed 1 million dirhams at 3.99% and saved 150,000 dirhams in your linked account, you could pay off your mortgage faster and the comparative rate would become 3.11%,” said he added. “The larger the amount in your savings account, the lower your payable interest rate will be.

“Over the past three years, we’ve seen a shift towards consumers looking for the cheapest fare, rather than compensation. I expect as we return to a higher rate environment, buyers will come back to using a product like this.

Reduced processing fees

Banks could, while raising interest rates on loans, alleviate some of the pain for customers by reducing processing fees. In Dubai‘s property market, “the split between cash buyers and mortgage buyers year-to-date is 57%, with cash buyers leading the way,” said Husni Al Bayari, chairman of D&B Properties.

Banks will hate to see this spread widen further. Rebates or an outright waiver of bank processing fees could be offered, and mortgage borrowers should be alert to such a possibility. Banks might also be willing to offer free real estate appraisals before the deal closes. And for existing mortgage takers, refinancing options will open up in the short term, offering a chance to reduce the size of their liabilities.

Incentives for developers

No help from the banks on reducing the burden of mortgage repayments and the constant rise in rates? Then find out how many developers are willing to help.

“More and more developers are offering increased flexibility, often offering longer payment plans on off-plan projects, especially in the post-handover phase,” Al Bayari said. “Developers can also offer a waiver on costs associated with buying property such as property registration fees and maintenance fees.”

“Mortgage buyers can consider rent-to-own programs as these come with a lower down payment and do not require taking out a mortgage. -signature to qualify for a loan, borrow against life insurance, or use cryptocurrencies on the Dubai Regulated Market.” (The last option, paying via crypto, had been gaining traction in the real estate market, but with their values ​​eroding sharply, it may take some time before property buyers can profit from such transactions.)


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