Impact of Federal Reserve Rate Cut
According to experts, the US Federal Reserve’s decision to cut interest rates by 0.5% will positively impact the UAE property market. Local banks are expected to lower mortgage rates in the coming days and weeks.
The Fed’s first rate cut since 2020 may result in substantial savings and more affordability for potential UAE homebuyers as mortgage rates decline. Lenders may soon offer more alluring borrowing rates if borrowers want to refinance their mortgages or purchase real estate.
Expected Changes in the UAE Banking Sector
“We expect UAE banks to announce reduced rates within the next week. Two banks have already dropped their rates, and others will follow soon,” said Sameer Vaya, founder and managing director at Mortgage Simplified UAE.
Potential Savings for Homebuyers
Consider a salaried buyer making a 20% down payment on an AED 2 million property purchase to demonstrate the possible impact. Assuming a fixed interest rate of 4.40% for three years on a 25-year mortgage, their current monthly repayment would be around AED 9,342, according to an example from the mortgage experts at Holo.
However, if rates were to drop to 3.90% in line with the Fed’s cut, the same mortgage would cost only AED 8,869 per month – a savings of AED 473 each month or over AED 5,600 per year.
Opportunities for End-Users and Investors
Given the high cost of rent, Vaya thinks that now is a good time for end users to consider getting a mortgage.
“With no sign of property prices dropping, plus the increasing rents, the reduction in interest rates comes as positive news,” he said.
“For most end-users, the monthly installment comes equal to or less than their monthly rent.“
The lower rates could also spur increased investor interest.
“For investors, the same principle applies; with an increase in rent and decrease in installment, bank payments will easily be covered from their rental income,” Vaya added.
Advice for Potential Buyers
For those looking to take advantage, Vaya advises against waiting too long. “Buyers may not have to wait too long – approximately a week and we may have new reduced offers. Rather than contacting various banks, speak to a mortgage consultant who can help identify the best product for their profile and requirements.“
He pointed out that sales contracts usually have a 45–60-day validity period, which gives buyers and mortgages enough time to finish their transactions at the new, cheaper rates.
Broader Implications for UAE Real Estate
The rate reduction can broadly affect the UAE real estate market, not just monthly payments. According to Vaya, there will be a “domino effect” as increased affordability increases demand from buyers, especially from end users who want to lock in favorable rates and climb the housing ladder.
“Lower interest rates mean lower monthly payments, more affordability, and more buyers,” he said, adding that inquiries from non-resident buyers have also increased lately.
Also Read: Investment in UAE: Real Estate Opportunities for Luxury Apartments
Market Outlook for the Coming Months
Vaya believes the combination of lower rates and developers wanting to maximize annual sales will significantly enhance the market in the coming months, especially with a flurry of events and tourist arrivals anticipated towards the end of the year.
“Let’s not forget we are entering the last quarter of the year,” he said.
“Banks, even real estate companies, and developers would want to maximize their numbers for the year. Hence, we might see offers from both banks and developers. Buyers should benefit from the various offers, plus the overall positive impact on real estate.“
