Your selection has produced no results, please reselect using the filters section.
Mortgages with Fixed Interest Period
With mortgage transactions slowing slightly in the UAE banks are making mortgages more attractive in an attempt to win your business. One of these methods is by offering an initial fixed interest rate period. It is now common for banks in the UAE to draw you in with these low interest rates and then sting you with higher interest rates at a later stage. These introductory rates generally last between one to two years and at the time offer exceptional value. However you must consider once this fixed rate period is over what will happen to the interest rate connected with your mortgage.
What is a Fixed Interest Period?
A mortgage that has an initial fixed Interest rate works by offering you equal fixed repayments over a set period of time. Within the UAE most fixed rate periods range between one to five years. During this period the interest rate will not change and your repayments are not affected by fluctuations in the financial market.
What are the benefits of an Initial Fixed Interest Period?
A fixed rate period ensures you know exactly what you will be paying each month and allows you to budget accordingly. It provides a period of security and having just paid a large down payment for your property it allows you to get your finances in order. Within the UAE most new mortgage policies will offer an initial fixed rate period. Once this period is up you are typically switched onto a variable interest rate.
Is a fixed rate of interest the best option?
The initial fixed interest rate period is often provided to help you ease into your mortgage repayments, however you do have a choice as to the type of mortgage you pick.
For most banks once your fixed rate period has ended you will be moved onto a variable interest rate. Most banks will base this variable rate from the UAE Central Banks EIBOR rate. The EIBOR rate is set by taking a selection of UAE’s banks interest rates of producing an average.
Not every bank will use the same variable rate so be sure to check how your bank would calculate this rate. In the case that your bank does provide you a very low fixed rate of interest for the first few years you need to examine the small print in detail. It could be the case that your repayments then become a lot higher offsetting any savings or benefits you made in the initial period. It is recommended that you consider the fixed rate and the following variable rate to work out your entire costs when applying for a mortgage.
What about if I opt for a Fixed Period on the long term?
The security of fixed payments usually comes with a slightly higher interest rate. You will also not benefit if interest rates in the market decrease as your mortgage repayments will be fixed.
Within the UAE most mortgages are variable however providers will renegotiate a fixed interest rate for 3- 5 years if that is your preference.
In times when the economy is uncertain industry experts tend to agree that fixed rate mortgages provide safer options.
As a consumer choosing the best interest rate for you will have financial implications. Mortgage applications in the UAE and most mortgages offered by banks are done so with the variable interest rate applied.
It is important to fully understand the differences between an initial fixed rate period and what it means when switching to a variable rate. We have done a lot of the research for you so why not check out our other guides on UAE Mortgages.