LloydsTSB offers US dollar mortgages on Dubai property
Complex Made Simple

LloydsTSB offers US dollar mortgages on Dubai property

LloydsTSB offers US dollar mortgages on Dubai property

One clever way to position your personal finances to benefit from a possible revaluation of the UAE dirham is to take out a US dollar mortgage on UAE real estate. That way after revaluation the value of your debt will drop in local currency terms and so will your monthly repayments. Meanwhile, the value of your house in US dollars will go up by whatever the amount of the revaluation, and economists are arguing for 3-20%.

    LloydsTSB is offering this facility through its Cyprus office, and one reader of this column told AME Info that he had just secured a US dollar mortgage against a property in Dubai at 5.5%.

    This is already better than most of the 23 lenders in the UAE whose best rate of 7.5% is only exceeded by the 5% dirham mortgage deal that the Commercial Bank of Dubai has for its lowest risk clients.

    But obtaining a mortgage in US dollars is a win-win option, because there is absolutely no risk of a devaluation of the dirham, and that is really the only way you could be caught out.

    Revaluation bonus

    Instead, you sit and watch as the pressure builds up on the UAE and other GCC central banks to revalue the local currency. Already very considerable inflation pressures are leading to mounting calls for official action, and one of the few measures that the authorities can actually take to dampen inflation is revaluation, most of the rest is hot air.

    No lesser figure than Alan Greenspan, the last Fed Chairman, told an audience in Abu Dhabi last month that this should be done without delay. The pressure for revaluation just piles on and on, and eventually something will have to give.

    It could be as simple as a further collapse in the US dollar as the US slides into a deeper and deeper recession. The UAE Central Bank is hoping the US dollar will recover and make revaluation unnecessary, but that hope looks more and more hopeless as the weeks pass.

    Be George Soros

    George Soros bet on the pound having to devalue in the early 1990s, and made a $1bn profit when the Bank of England finally gave in. Why should you not do the same on your home mortgage in the UAE, admittedly on a far more modest scale?

    There is no reason to fear extra paperwork. The process of obtaining a mortgage is a paper chase whoever you choose to do it, and the staff at LloydsTSB are well trained to assist you in the process. You will hardly be their first mortgage customer.

    And even if by some amazing twist of fate the UAE manages to avoid what looks the inevitable revaluation of its currency, then you will still have a highly competitive mortgage rate from one of the UK's top High Street banks.

    Besides, you are not just playing on revaluation in the UAE but also the length of the US recession. If George Soros is right this will be the worst post-war US recession, and that will mean interest rates stay very low for a long time. Why not lock into those rates?

    See also:
    UAE economy has outgrown the dollar peg
    AMEinfo Staff

    AMEinfo staff members report business news and views from across the Middle East and North Africa region, and analyse global events impacting the region today.

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