Mortgages After the Crash: A New Caution

Mortgage lending in Dubai has changed dramatically since the boom. Then, banks competed to lend, often with high loan-to-value ratios and relaxed criteria. Today, lenders are far more cautious, requiring larger deposits, stricter checks and, in many cases, higher rates. Discussions about clearer rules for the mortgage market are also under way.

What has changed

• Lower loan-to-value: buyers need larger deposits.
• Stricter checks: income, employment and existing debts are scrutinised.
• Selectivity: banks prefer completed properties and established developers.
• Fewer off-plan loans: financing for uncompleted homes is limited.

Why caution is healthy

Excessive lending fuelled speculation during the boom. More cautious lending reduces the risk of a similar cycle and protects borrowers from taking on unsustainable debt.

What borrowers should do

Borrowers should compare offers, understand fees and rates, and ensure their repayments are affordable even if rates rise. A larger deposit improves terms and reduces risk.

Future regulation

Clearer rules on lending standards, consumer protection and transparency would benefit both lenders and borrowers. We expect the mortgage market to become more structured in the coming years.

Effects on demand

Tighter lending limits the number of buyers who can purchase, particularly first-time buyers. As credit gradually returns, demand from this group is likely to increase.

Choosing between fixed and variable rates

Borrowers in Dubai can usually choose between rates fixed for an initial period and variable rates linked to a benchmark. Fixed rates offer certainty, which helps with budgeting, but they often carry higher initial costs and penalties for early repayment. Variable rates may start lower but can rise, increasing monthly payments. The right choice depends on the borrower's income stability, how long they plan to keep the property and their tolerance for risk. Borrowers should ask lenders to show repayments under different rate scenarios and to explain all fees, including arrangement, valuation and early settlement charges. Life and property insurance are usually required. Reading the full loan offer, rather than relying on a summary, helps avoid surprises later.

Our view

A more cautious mortgage market is part of Dubai's adjustment to more sustainable growth. We help clients find suitable financing and avoid over-borrowing.