UAE interest rates drop: More Dubai property buyers opt for mortgage over cash
Shift from Cash to Mortgage Financing
Due to declining interest rates both domestically and internationally, more and more Dubai property purchasers are choosing mortgages over cash payments. Betterhomes, a real estate firm, reports that, in contrast to the previous year, when cash purchasers dominated the market, there has been a notable change in the types of buyers. Over 60% of the brokerage’s buyers in the third quarter of 2024 selected mortgages as their preferred method of house financing, increasing the share of mortgages by 8% annually.
Competitive Interest Rates in Dubai
“The increase in mortgage buyers can be attributed to Dubai’s relatively low interest rates compared to other global cities. While central banks in many regions have started to reduce rates as inflation cools, making borrowing more affordable, Dubai’s rates have remained competitive,” Betterhomes said in its quarterly report released on Thursday.
Recent Rate Cuts and Market Impact
“Mortgage buyers received a welcome boost in September with an interest rate drop of 0.5%, the first rate cut in over four years. Cheaper mortgages in the face of rising rents have understandably resulted in an influx of new buyer inquiries from tenants,” said Richard Waind, CEO of Betterhomes.
Tenant Interest in Home Ownership
Seven out of ten tenants in Dubai, or 67%, said in the Betterhomes Future of Living Survey that they would like to own a property within the next three years. “Lower interest rate environment will support that aspiration,” said Waind.
Mortgage Education and Market Awareness
“We’re seeing a shift in the market towards better mortgage education, driving higher activity. More people are approaching independent mortgage advisors before going to their banks to understand their options fully,” Lewis Allsopp, chairman of Allsopp and Allsopp, has said.
Central Bank Policy and Economic Impact
The Central Bank of the UAE reduced the Base Rate applicable to the Overnight Deposit Facility (ODF) by 50 basis points, from 5.40% to 4.90%, last month by the US Federal Reserve’s decision. This translates into cheaper interest rates for UAE customers on vehicle, mortgage, and personal loans. Rate reductions increase the nation’s economic activity since more individuals and businesses choose to lend money for startups and business expansion.
Also Read: Best Areas to Invest in Dubai for a Luxurious Lifestyle in 2024-25
Future Outlook and Market Trends
Analysts predict that the Fed will keep loosening its monetary policy, lowering interest rates again in 2025 and later this year. According to Property Finder, a Cavendish Maxwell company, ready houses may increase activity as mortgage rates decline and potential buyers have more purchasing power. However, this will depend on merchants setting fair prices and refusing to use this as a chance to try aggressive pricing tactics.
Current Mortgage Statistics
According to the report, loans for new purchase money mortgages accounted for 51.3% of borrowing activity in August, a decrease of 1.7% from the previous month. The average amount borrowed was Dh1.77 million.
