Real estate experts in Dubai suggest that prospective buyers explore the option of choosing fixed-rate mortgages this year. They point to the current lower fixed rates compared to variable options, coupled with the prevailing uncertainty in short-term rates.

Sofkul Islam, CEO at Victorstone, advises, "My recommendation regarding fixed versus variable would be to opt for fixed. Banks are still offering attractive 3-5 year fixed rates well below the current base rates, primarily due to the existing uncertainty in short-term rates."

Lock in a mortgage amid stable interest rates in the UAE. In 2022, Dubai witnessed a record-breaking 16,700 mortgage transactions, experiencing an average mortgage value surge of 7% to AED1.67 million.

The report highlights that 95% of mortgages were secured by residents, with UAE citizens constituting 82% of borrowers. Moreover, given fixed interest rates ranging from approximately 4.5% to 5%, experts in the industry are advocating for fixed-rate mortgages as the preferred choice for homeowners in the current economic climate.

Mortgage rates in the UAE are intricately linked to the Emirates Interbank Offered Rate (EIBOR), influenced by the actions of the US Federal Reserve due to the dollar-dirham currency peg.

In November, the UAE Central Bank declared no adjustments in the Base Rate for the Overnight Deposit Facility (ODF) at 5.40%, aligning with the US Federal Reserve's decision to maintain its monetary policy rate.

"While the anticipation is for eventual decreases in interest rates, the adjustment period required for variable rates to match the currently favourable fixed rates is considerable," commented Sofkul.

The decision of the US Federal Reserve regarding interest rates could be swayed by the outcomes of the presidential election and its repercussions on the global economy, consequently influencing the UAE.

He further expressed, "The stability in these interest rates provides a level of predictability and financial assurance, rendering the prospect of homeownership particularly appealing."

However, forecasting changes in interest rates is intricate, given the interplay of factors like economic indicators, geopolitical events, and market sentiment.

Prospective homebuyers are advised to thoroughly assess their financial strategies and consider the stability inherent in fixed-rate mortgages.

"As no one can predict the future, prospective homeowners should ensure certainty about their ongoing costs, and it's crucial to be well-prepared with a comprehensive income and expenditure plan," remarked Sofkul.

Sofkul recommended exploring refinancing, a process allowing homeowners to alter the interest rate and/or terms of their existing mortgage, potentially resulting in long-term savings and increased budget flexibility.

He further noted, "Mortgage payments remain comparatively affordable when juxtaposed with rental prices for equivalent units."

Consumer buying habits are tilting towards a greater focus on long-term investments, with tenants expressing a preference for property ownership over renting.

The Dubai real estate sector's record-breaking performance this year. However, high rental costs have prompted many residents to explore property ownership in the emirate.

"It's an opportune time for potential homebuyers to evaluate their options. The stability in these interest rates provides a sense of predictability and financial security, making the prospect of homeownership highly appealing. Therefore, if you've contemplated the shift from renting to owning, the current conditions in the Dubai mortgage market might be favouring your decision," noted Sofkul.

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