UAE mortgage refinance in 2023: 3 out of 4 homeowners on variable rates went for a remortgage in Q4 2022 in the UAE

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Mortgage rates in the UAE increased drastically in 2022 and thousands of homeowners have refinanced their mortgages in Q4 2022.

Schedule a free consultation call with Lenddoo to simulate how much you could save. Lenddoo is the UAE’s leading commission free refinance mortgage advisor.

1. Status quo

2022 was an excellent year for UAE and Dubai home owners:

• In terms of price index: Dubai’s median transaction price in 2022 was 1,529M AED, marking a 28% increase compared to 2021
• In terms of transactions: Dubai has registered 67k transactions, marking a 71% increase compared to 2021, bringing an unprecedent liquidity to the market

  Yet, mortgage owners on variable rates have had their worst nightmare coming through.

  Here is why.

  In order to tame the growing inflation, the UAE Central Bank (following the FED) has increased its EIBOR (in other words: the UAE Interbank rate) by 4.5% in a 12-month period, which made it the steepest increase in rates in the history of the UAE !

  By direct implication, the UAE Mortgage rates, driven by the EIBOR, increased by more than 4.5% in 12 months.This led to 3 direct implications:

• Mortgage owners with variable rates have seen their effective rate jump from ~2-3% annually to more than 6 - 9% , with some home owners paying more than 10% on an annual basis

• Mortgage owners with soon to be variable rates will also see a major jump in their payouts as soon as their mortgage rates turn to be variable, which could put households with high DSR (debt stress ratio) into financial distress

Lenddoo Mortgages estimates that for every 1M AED of mortgages, homeowners on variable rate will be paying or have paid an additional ~4k AED / month in Q1 2023, compared to the same period last year.

And as per the UAE Central Bank latest January 2023 prudential guidance, the market expects that mortgage rates will most likely continue growing for the next 18-24 months, before stabilizing within 2 years-time.

UAE 3M EIBOR evolution November 2008 – December 2022 – at the highest since the global financial crisis in 2008.

1. What have homeowners done about it?

In Q4 2022, Lenddoo Mortgages says that 3 out of 4 mortgage variable rates holders have or are currently refinancing their mortgages into lower, fixed rates mortgages. And the trend is even stronger as we start the year in 2023.

“UAE remortgage”, “UAE remortgage rates” and “UAE mortgage rates” have been the most trending keyword in mortgage search in Q4 2022, adds Lenddoo Mortgages.

With the banks offers in the market, refinancing your mortgage helps you “Freeze” your mortgage rate within a period of 3 to 5 years, and lower this same rate

• From: a variable rate around 6-9% depending on your current mortgage terms
• Into: fixed rates as low as 4.99% fixed for 3 years

This basically helped unlock a number of benefits:

1. Fix the rate for period of time that is long enough for rates to cool down
2. Reduce the monthly payouts

And effectively make monthly savings worth ~3.5K AED / month for every 1M of mortgage

Lenddoo has helped hundreds of clients refinance their mortgages. Schedule a free consultation call with Lenddoo to simulate your savings. Lenddoo is the UAE’s leading commission free refinance mortgage advisor.

1. How can you refinance your mortgage in the UAE?

The UAE banking market still offers cheap fixed mortgage offers for homeowners willing to refinance their mortgages.

In fact, as of January 2023, several banks offer 3Y fixed rate mortgages with a fixed rate of 4.99%, much lower than any existing variable rate mortgage.

Banks can in fact offer such low-rate mortgages driven by large Retail deposits that allow them to offer mortgages below or approximately equal to the 3M EIBOR mark.

Lenddoo Mortgages, founded in 2022, is the UAE’s leading refinancing mortgage proptech and has helped hundreds of homebuyers compare, select and get a cheaper fixed remortgage rate.

Lenddoo Mortgages can help you:

• Compare existing mortgage refinance rates in the UAE
• Select the right offer for your profile
• Advise you on the process

Besides, Lenddoo Mortgages services and advisory are 100% free, as they get remunerated by their banking partners.

Holding a variable rate mortgage? You can also schedule a free 30min consultation video-call with Lenddoo and simulate your savings.

Lenddoo’s services are 100% commission free, as they get remunerated by their banking partners.

FAQ

Can you refinance your mortgage in Dubai and the UAE?

Yes, you can refinance your property in Dubai and the UAE. The UAE Central Bank allows other banks to “buy” your existing mortgage at lower rates, and most of the homebuyers would usually refinance their mortgages every 3 to 4 years, as market offers and savings opportunities emerge.

What is the general rule for refinancing a mortgage?

The general rule to refinance a mortgage is to compare your existing mortgage rate with the market leading rate that you can be offered.

Sometimes, it can also make sense to forecast what the variable rate could be. If the foreseeable savings outgrow the fees to refinance a mortgage, then it definitely makes sense to refinance your mortgage.

Is refinancing a loan a good idea?

Yes it is a good idea to refinance your mortgage when you can save on your monthly payouts.

I am holding a variable rate mortgage in the UAE. Why shall I refinance?

The answer is yes. You should refinance your mortgage as soon as possible as in a rate increasing environment, your mortgage monthly payout increases with time. If you are on a variable rate, you are "exposed" to variations in the mortgage rates, which are driven by the UAE Central Bank.

When shall I refinance my UAE mortgage?

If your mortgage rate is variable or will become variable in few months, it is the right time to refinance your mortgage. As of January 2023, 3Y fixed rates are as low as 4.99% for 3 years. Choosing a fixed rate now will reduce the down-side for the next 3 years.

My mortgage rate in the UAE is becoming variable soon. Am I exposed?

Yes, you are exposed to the variations of the rates as long as you are expected to have a variable rate.

Do I have to wait for my rate to be variable before refinancing?

No, you don’t have to wait until it becomes variable to refinance. Since rates continue increasing, it is better to refinance as soon as possible to be able to capture and “freeze” a low rate today. 

What is the process to refinance my mortgage in the UAE?

The process is straight forward, paperless and takes less than 5 days if done with the right mortgage provider. Speak to Lenddoo Mortgage Advisors to compare, select and get the right refinance offer for your profile. Once you select it, Lenddoo requests an approval from the Bank, which then buys back the mortgage from your existing bank at the new rate.

What are the fees associated with a refinance? 

• There are 4 fees to consider.
• Bank settlement fee: Min (10,000 AED, or 1% of the mortgage value), capped at 10,000 AED
• Property valuation fee: which can be anywhere between 2,650 and 3,150 AED, depending on the bank
• Mortgage registration fee: 0.25% of the mortgage value
• Mortgage broker fee:0 ! Lenddoo Mortgages is free to you, as they get remunerated by our banking partners.

Despite the fees, which are approximately ~1% of the mortgage, savings over the next 3-5 years are expected to be at the range of 6-7% (~approximately 1-2% per year) which outgrow the fees.

Lenddoo Mortgages, founded in 2022, is already theUAE’s leading refinancing mortgage proptech and has helped hundreds of homebuyers compare, select and get a cheaper fixed rate mortgage.

Holding a variable rate mortgage? Schedule your free 30min consultation video-callwith Lenddoo and simulate your savings.

Looking to acquire a new property? Simulate and compare UAE’s best mortgage rates here.

Lenddoo’s services are 100% commission free and are remunerated by their banking partners.