Banks across the UAE are playing an increasingly influential role in energizing the real estate sector by introducing mortgage products with interest rates below 4%, despite the prevailing three-month Emirates Interbank Offered Rate (EIBOR) ranging between 4.2% and 4.3%. This strategic pricing move is capturing the attention of both local and international investors.
In addition to lower borrowing costs, flexible financing schemes, such as the widely adopted 70-30 and 80-20 payment models, are making property ownership more accessible. These developments come at a time when the real estate market is witnessing heightened interest, even amid reduced expectations of near-term interest rate cuts.
Currency Strength and Global Conditions Fuel Foreign Investment
Recent depreciation of the US dollar has strengthened major global currencies like the British pound and euro, resulting in increased purchasing power for foreign investors. As a result, Dubai properties have become relatively more affordable for buyers from overseas, further accelerating demand.
Real estate specialists note that the appeal of Dubai’s market continues to grow, driven not just by ultra-high-net-worth individuals but also by salaried professionals and non-resident buyers who are now more inclined to leverage financing options. The broader macroeconomic landscape, including rising global tariffs, higher taxation, and economic instability in several regions, is amplifying this trend.
Additionally, by relaxing the AED 1 million upfront requirement for property-linked golden visas, UAE banks have lowered the entry barriers for prospective investors, contributing to the upswing in mortgage applications.
Rising Mortgage Activity Reflects Shifting Market Dynamics
Industry insiders confirm that banks are now taking an assertive approach by financing final installments on off-plan projects structured with front-heavy payment schedules. This marks a shift from past practices, where such financing support was primarily reserved for properties developed by Tier 1 companies.
According to data from Property Monitor, mortgage transactions in Dubai surged by 24% year-on-year in Q1 2025, underlining the financial sector’s expanding role as a key facilitator in the real estate value chain. Experts believe this trend is helping stabilize residential demand across Dubai’s diverse micro-markets.
The CEO of Colliers Middle East and India highlighted that UAE banks’ proactive approach, offering mortgage rates below the central bank benchmark, is a calculated move to capitalize on the increasing appetite of investors navigating a persistently high global interest rate environment.
Evolution of Payment Structures and Financing Models
A notable shift is occurring in how developers and banks structure property payments. Front-loaded schemes such as 70-30 and 80-20 are becoming increasingly prevalent. In response, many financial institutions are now aligning their offerings to support these models by stepping in with final payment coverage once buyers contribute at least half of the property’s value.
Previously confined to premium development firms, this model of bank-supported financing is gradually expanding to include a wider range of developers. While the UAE’s mortgage market represented $62 billion of last year’s $240 billion in total property transactions, analysts stress the importance of contextualizing this figure within the broader evolution of financing options.
Interest rate expectations have also been revised. While initial forecasts in early 2025 predicted up to five rate cuts, the market now anticipates only two or three. Since the UAE dirham is pegged to the US dollar, any shifts by the US Federal Reserve directly impact domestic lending rates and EIBOR, further influencing mortgage trends.
Technology and AI Drive Mortgage Process Efficiency
Alongside favorable lending terms, advancements in artificial intelligence are streamlining the mortgage process, making it more appealing to prospective buyers. Sector professionals report that AI integration is helping reduce the traditionally time-consuming mortgage application procedures.
These digital solutions provide real-time document verification, flagging incomplete submissions or inconsistencies, thereby minimizing delays. This is particularly valuable in Dubai’s fast-moving property market, where speed and clarity are often critical to closing deals.
Shifting Customer Expectations in a Digital-First Market
The demand for seamless digital experiences continues to grow, with borrowers increasingly expecting end-to-end online services, from document submission to loan approval. While many banks are still in the process of upgrading outdated systems, the need to either scale up human support or fully embrace digital transformation has become urgent.
Until such upgrades are widespread, intermediary platforms that offer faster approvals and clearer communication are emerging as trusted partners, bridging the gap between traditional systems and modern customer expectations.
Source: https://www.arabianbusiness.com/industries/real-estate/uae-banks-fuel-real-estate-demand-surge-with-lower-mortgage-rates-extended-financing-facilities/
