Prop-tech Startup Lenddoo says now is the right time to refinance your mortgage
UAE interest rate hike: Property owners will do better locking in mortgage rates for '3-5 years'
This article has been brought to you by Lenddoo.com, the UAE’s leading Prop-Tech Mortgage Company. Lenddoo services are 100% free of charge and helps you get the right mortgage for your profile.
The Status Quo
The Dubai property market has boomed in 2021 and continues to show strong signs of strength in 2022. However, there is a major cloud coming as the mortgage interest rates have been increasing steadily since the beginning of the year.
A major indicator: the EIBOR, (the abbreviation of the Emirates Interbank Offered Rate - the benchmark interest rate for lending between banks within the UAE) has increased by ~2.5% between November 2021 and August 2022 (3M EIBOR).
This increase has been translated into much more expensive mortgage rates. In February 2022, the leading 5Y fixed mortgage offer was at ~2.5%, while in August 2022, the leading 5Y fixed mortgage offer is at ~4.5%, which is 2 percentage points higher.
The forecasts are also not bright: The US Federal Reserve has announced a number of additional hikes until end of 2023, with some expected to be „agressive“, and while historically the UAE Central Bank has been following the FED almost 1 to 1, this means that the mortgage rates in the UAE are expected to continue increasing, until at least the inflation start showing some signs of deceleration.
Mind your expenses
What this means in reality is that it will put a major pressure on both new property buyers, and existing homeowners whom their mortgages are variable:
1. For existing homeowners with variable mortgages:
On a mortgage of 2M, variable mortgage holders could be paying up to ~AED 3.5k/monthly just to cover the extra interest rate vs. what they had been paying 6 months ago
2. For new buyers seeking mortgages:
On a mortgage of 2M, homebuyers would be paying just as much more.
Make the right choice, fast
Borrowers in the UAE will have to make some critical choices to avoid being burned down with higher interest expenses.
1. For existing borrowers with variable rates:
It will be critical to refinance your mortgages as soon as possible and get a fixed rate for at least 3 years. The leading 3Y offer in August 2022 is still below 3.9% mark, and Lenddoo can help you refinance your existing mortgage free of charge.
2. For new homebuyers:
It will be important to choose a mortgage offer with a fixed rate for at least 3 years. While some buyers try to over-optimize on the short term by going for cheaper rates (1Y, or variable), this can be a major risk as rates continue picking up. Lenddoo can help you find the right mortgage for your profile.
"But these decisions need to come fast."
Leverage Lenddoo, the UAE's leading Prop-Tech Mortgage Company
Lenddoo is a prop-tech startup that was founded by finance professionals who went through the daunting process themselves and decided to create a platform to help home buyers. After consulting with the country’s major Banks, Developers and Real Estate agencies, Lenddoo has built a service that ensures the most efficient way to get the best mortgage for your requirements:
- 100% free of charge (Lenddoo is remunerated by its banking partners)
- Access to all 20+ major UAE Banks
- Seamless end-to-end digital experience
- Supported by the best advisors 😉
To learn more, visit Lenddoo.