Mortgage Rate

Dubai real estate thrives amid higher mortgage rates as investors prioritize stability

Despite the second increase of 0.25 percent on Wednesday, March 22, it is expected that end users will continue to invest in Dubai real estate. Market sources claim that the Dubai and UAE real estate market’s reputation as a “safe bet” is the primary driving force behind the renewed demand for mortgages.

In January and February 2022, mortgage rates were around 2.99 percent, whereas they currently range from 5.75 to 6 percent.

As part of their Ramadan promotions, banks are offering 5-year fixed-rate mortgages at 5% to maintain the momentum. If interest rates decrease at any point in the next year or two, borrowers can easily reevaluate their agreements and repay at the new rates.

Surprisingly, despite the low interest rates, more real estate deals backed by mortgages are being made in Dubai between January and February compared to the same period last year. Interest rates and mortgage loans have been steadily increasing since March 2022, with a total of nine increases, including the most recent one.

The mortgage data for January and February 2023 is somewhat unexpected given the significant decline in mortgage agreements in Q4-2022. It was anticipated that higher borrowing rates would greatly reduce the demand from end users, while cash-ready buyers, primarily investors, would take the lead.

However, the reality has been different since the beginning of the year. Mohamad Kaswani, Managing Director of Mortgage Finder, stated, “Mortgage transactions in the first two months grew 20 percent compared to 2022 in Dubai. Application volumes have already surpassed Q1-2022 by more than 40 percent, indicating a positive trend in mortgage demand.”

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