Some banks in the United Arab Emirates have slashed interest rates on mortgages and real estate finance to less than three per cent in what experts describe as “misleading” offers.
They added that the announced relatively low interest rates on mortgages are applied in the first year of the repayment period, but, after that, banks start levying regular market rates.
According to a survey of a number of local banks conducted by Al-Ittihad, there is a major discrepancy in interest rates on mortgages and other real estate financing products.
The survey revealed that interest rates ranged between 3.99 per cent and six per cent, depending on the offer and on whether the property is under construction or already built.
A number of banking experts said that some banks introduce offers on mortgage interest rates, especially near the end of the fiscal year in an attempt to reach the targeted number of clients and improve the overall performance of the mortgage and properties financing portfolio.
They noted that the interest rates in the market have not seen major changes since the beginning of the current year.
The UAE’s central bank data reveals that the construction and real estate sector in the country accounted for AED22.4 billion in new loans in 2014, while mortgages comprised 14.3 per cent of the total value of deposits with local banks.