Even the second 0.25 percent rate rise on Wednesday (March 22) is not expected to prevent end users from purchasing real estate in Dubai. Market sources claim that the revival of mortgage demand is driven by the Dubai and UAE real estate market’s reputation as a “safe bet,” prevailing over all other factors.
In January–February 2022, mortgage rates were about 2.99 percent instead of 5.75–6 percent today.
To maintain the pace, banks are also offering 5-year fixed-rate mortgages at 5% as part of their Ramadan promotions. The borrower can easily refinance the arrangement and repay at the new rates if rates drop at any point in the next year or so.
Despite interest rates being at their lowest during that time, mortgage-backed property deals in Dubai between January and February are higher than at the same time the previous year. Only starting in March 2022, interest rates and mortgage loans have been rising. Since then, there have been nine increases, including the one that happened late yesterday.
The mortgage numbers in January and February 2023 are somewhat unexpected because such deals experienced a large decline in Q4-2022. Higher interest rates were believed to significantly reduce end-user demand, with cash-ready buyers—mostly investors—taking the lead.
That’s not how deals have been panning out since the start of the year. “Mortgage transactions in the first two months grew 20 percent compared to 2022 in Dubai,” said Mohamad Kaswani, Managing Director of Mortgage Finder. “We are seeing application volumes already surpassing Q1-2022 by more than 40 percent, which is an indication of mortgage demand moving forward.”