Mortgage buyers received a boost in September with a 0.5% drop in interest rates, marking the first rate cut in over four years.
In Dubai, property buyers are increasingly moving from cash purchases to mortgages as interest rates decline both locally and globally. Compared to last year, when cash buyers dominated the market, there has been a notable shift in buyer profiles, according to property brokerage Betterhomes.
In the third quarter of 2024, over 60% of the brokerage’s buyers opted for mortgages as their preferred financing method, resulting in an 8% year-on-year increase in mortgage usage.
“The rise in mortgage buyers can be attributed to Dubai’s relatively low interest rates compared to other major cities worldwide. While central banks in various regions have begun reducing rates as inflation cools, making borrowing more accessible, Dubai’s rates have remained competitive,” stated Betterhomes in its quarterly report released on Thursday.
“Mortgage buyers experienced a significant boost in September with a 0.5% interest rate cut, the first reduction in over four years. More affordable mortgages, amid rising rents, have understandably led to a surge in inquiries from tenants,” said Richard Waind, CEO of Betterhomes.
According to the Future of Living Survey from Betterhomes, nearly 67% of tenants in Dubai expressed a desire to purchase a home within the next three years. “The lower interest rate environment will support that aspiration,” Waind added.
“We’re observing a shift towards improved mortgage education in the market, driving increased activity. More individuals are consulting independent mortgage advisors before approaching banks to fully understand their options,” said Lewis Allsopp, chairman of Allsopp and Allsopp.
In line with the US Federal Reserve’s recent decision, the Central Bank of the UAE cut the Base Rate for the Overnight Deposit Facility (ODF) by 50 basis points last month, lowering it from 5.40% to 4.90%. This reduction means lower interest rates for UAE consumers on personal loans, mortgages, and auto loans. The rate cut is expected to enhance economic activity in the country as more individuals and businesses pursue loans for expansion and new ventures.
Analysts anticipate that the Fed will continue to ease monetary policy, likely cutting rates again later this year and in 2025.
Property Finder, a subsidiary of Cavendish Maxwell, noted that as mortgage rates decline and potential buyers gain increased purchasing power, ready properties may experience heightened activity. However, this will depend on sellers pricing their properties appropriately rather than resorting to aggressive pricing strategies.
In August, loans for new purchase mortgages accounted for 51.3% of borrowing activity, a decrease of 1.7% from the previous month, with the average loan amount at Dh1.77 million.
