Mortgage market updates – April 2020

Following the outbreak of COVID-19 and the challenges this has presented for individuals and businesses, the Central Bank of the UAE (CBUAE) has introduced new initiatives to help those facing financial difficulties at this time.

Banks across the UAE are gradually implementing these changes to help ease the financial burden that their customers may be facing. There have been a range of initiatives from the CBUAE covering all types of financial products, including credit cards, personal loans and mortgages. In this blog we will break down the five key changes and initiatives that have been introduced relating directly to the mortgage market and how these help you and your financial decisions in the coming months.

Increasing loan-to-values

The CBUAE issued a decree in March 2020 which allows banks in the UAE to increase the loan-to-value (LTV) for first time buyers by 5% for both expats and UAE nationals. This means that expats are now able to borrow up to 80% of their property purchase price and UAE nationals up to 85%. This is an increase from 75% and 80%, respectively.

Increasing the LTV for buyers reduces the down payment required, which is generally the biggest challenge for most. The down payment required by expats is now only 20% and just 15% for UAE nationals.

Although 5% may not seem like a large sum, when put into context it can make a huge difference. For example, as an expat interested in purchasing an AED 1M property, previously you would require a down payment of at least AED 250K. This requirement is now reduced by AED 50K!

Some banks are going further and allowing you to include some of the fees associated with buying within the loan. This takes the maximum LTV up to 90.1% for UAE nationals and 84.8% for expats.

Reducing interest rates

Since the end of 2019 we have seen rate reductions from the US Federal Reserve (US Fed), and as the UAE is pegged to the US dollar, we have seen interest rates in the UAE come down too.

Further rate reductions in the past few months from the US Fed and subsequently the CBUAE mean that mortgage rates are now at the lowest ever!

Interest rates and mortgage products are the most competitive that we have ever seen in the market, with fixed rate mortgages now available now from 2.70%. Rates like these provide a great opportunity to those who are interested in buying now and taking a fixed rate mortgage. We do not anticipate that rates will remain at current levels long-term.

For those with a mortgage already which is on floating (variable) rate, we would hope that your lender will pass these rate reductions on to you in the coming months. So you could see a reduction in your monthly repayments.
If you have a mortgage and are in a high fixed rate, then you could consider a buyout (remortgage). If you are interested in buyout options, please get in touch with us as we can help with this.

Processing fee waivers

Another initiative introduced is the reduction or waiver of processing fees when taking a mortgage. Some banks have put fee waivers or reductions in place to reduce the amount required to cover upfront costs when purchasing a property.

This initiative combined with the reduced down payment requirements help to make buying more affordable and achievable.

If you are considering a buyout (remortgage), it is worth noting that most banks will also allow fee waivers and reductions for buyouts as well as new mortgages.

Real estate fees in Abu Dhabi removed

Buying in Abu Dhabi has become even more affordable!

In addition to the processing fee reductions and waivers from the banks, the government has announced that there will be no no real estate registration fees for 2020 when buying in the capital.

Mortgage payment holidays

The current situation is affecting everyone, as such one of the key initiatives introduced by the CBUAE relates to mortgage payment holidays. The CBUAE has requested that lenders in the UAE offer temporary relief, up to six months, to customers that are unable to meet their mortgage repayments as a result of the pandemic. These deferred repayments can also be applied to new first time buyers.

If this applies to you, we suggest contacting your bank directly to have an honest conversation about your situation to see how they can best support you.

For those who already have a mortgage and, as a result of the pandemic, you are facing financial hardship that is impacting your ability to meet your mortgage repayments, we suggest contacting your bank about this as the Central Bank has requested lenders in the country to offer temporary relief to customers in this instance.

We are on-hand and available as normal, if you would like to discuss your mortgage options get in touch today.

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