UAE interest rates drop: More Dubai property buyers opt for mortgage over cash

Mortgage buyers received a welcome boost in September with an interest rate drop of 0.5%, the first cut in rates in over 4 years

Waheed Abbas

Published: Thu 17 Oct 2024, 7:49 PM

Last updated: Thu 17 Oct 2024, 9:55 PM

Property buyers in Dubai are increasingly shifting from cash to mortgage as interest rates have come down in the UAE and globally. There has been a significant shift in buyer profile compared to last year when cash buyers dominated the market, according to property brokerage house Betterhomes.

During the third quarter of 2024, more than 60 per cent of the brokerage's buyers used mortgages as their preferred home financing option, resulting in an 8 per cent year-on-year increase in mortgage share.

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“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.

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“Mortgage buyers received a welcome boost in September with an interest rate drop of 0.5 per cent, the first cut in rates in over 4 years. Cheaper mortgages in the face of rising rents have understandably resulted in an influx of new buyer enquiries from tenants,” said Richard Waind, CEO of Betterhomes.

Richard Waind

According to the Future of Living Survey released by Betterhomes, nearly 7 out of 10 – 67 per cent – tenants in Dubai have expressed a desire to buy a home within the next three years. “Lower interest rate environment will support that aspiration,” said Waind.

“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.

Lewis Allsopp

In line with the US Federal Reserve’s decision, last month, the Central Bank of the UAE cut the Base Rate applicable to the Overnight Deposit Facility (ODF) by 50 basis points, from 5.40 per cent to 4.90 per cent. This means lower interest rates for UAE consumers on personal loans, mortgages, and auto loans. The reduction in rates boosts economic activity in the country as more people and companies opt for lending for business expansion and to launch new companies as well.

Analysts expect the Fed will continue to ease monetary policy, cutting rates again later this year and in 2025.

Property Finder, a subsidiary of Cavendish Maxwell, said that as mortgage rates ease and prospective purchases find themselves with greater buying power, ready properties could witness a bump in activity. However, this will rely on sellers pricing correctly and not seeing this as an opportunity to test aggressive pricing strategies.

During August, it said loans taken for new purchase money mortgages accounted for 51.3 per cent (down 1.7 per cent from the previous month) of borrowing activity, with the average amount borrowed at Dh1.77 million.

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