Mortgage applications in the UAE increased by 78 per cent over the year to April and enquiries rose by 59 per cent in the same period, a sign that end users are increasingly seeking long-term solutions for their housing needs, according to data from consultancy Mortgage Finder. The average size of a home loan, however, decreased from Dh1.67 million in May 2018 to Dh1.31m in the same month this year, reflecting the relatively weak property market, said the consultancy, which is part of the real estate portal Property Finder Group. "We have seen a shift from an investor-led market to an owner-occupied market, with more end users buying to live in the property," said Chris Schutrups, managing director of Mortgage Finder. "This is likely due to the downward shift in prices which has made home ownership more affordable and achievable." Real estate prices in the UAE have remained weak since 2015, according to a report last year from Property Finder. Data from real estate consultancy ValuStrat finds Dubai residential capital sales values decreased by 12.4 per cent and rental values by 9 per cent for the first quarter of this year, when compared to last year. In Abu Dhabi, sales values were on average 12.2 per cent lower than the same quarter last year and rents were down by 6.9 per cent year-on-year. Analysts, however, see a recovery soon as investors continue to take advantage of lower pricing and the economy picks up on the back of stimulus measures by the government. In more than 80 per cent of the enquiries analysed by Mortgage Finder, buyers opted for a fixed interest rate, an unchanging rate that applies for the entire term of the loan or part of the term. However, with recent predictions from the US Federal Reserve that there may be rate cuts this year, Mr Schutrups said, “we are seeing a few more sophisticated buyers opt for lower margin variable rates". With the US dollar tied to the dirham, <a href="https://www.thenational.ae/business/money/how-falling-interest-rates-could-affect-uae-residents-1.877953">US Fed rate cuts would result in lower mortgage interest rates in the UAE</a>, making it more attractive for people to refinance existing home loans and take out a variable rate mortgage to pay less interest. The caveat is the 3 per cent early settlement fee introduced by the Central Bank of the UAE last year. Before the fee amendment in June last year, early settlement fees were capped at 1 per cent or Dh10,000, whichever was lower. Mortgage Finder estimates that refinancing transactions and mortgage transfers between banks have reduced considerably as a result. “We estimate that there has been about a 75 per cent reduction in the number of refinancing transactions and buyouts that we do. However, it is worth noting that these only accounted for about 5 per cent of transactions in 2018,” Mr Schutrups said. Some banks differentiate between using cash to settle a mortgage early or refinancing, with a difference of as much as 2 per cent of the outstanding loan amount, according to Mortgage Finder. For example, banks commonly charge 1 per cent when the payment is made in cash upon selling a property versus 3 per cent when settled by refinancing. Banks may also charge a higher rate to non-residents or may force buyers to sell their property before leaving the country, said the consultancy, which previously operated as MIBME Mortgage Broker and was acquired by the Property Finder Group in 2014. On the positive side, some banks allow for penalty-free overpayments of up to 10 to 20 per cent, allowing homeowners the option to pay off their mortgages early. The average length of a mortgage in the UAE is seven years. Mr Schutrups also recommends borrowers ask their lender to consider including the upfront fees required, such as the 4 per cent Dubai Land Department fee and the real estate agent fee, within the mortgage. “Being able to include just 4.5 per cent of the upfront fees into the mortgage can increase buying power by around 18 per cent as more of your cash can be put towards deposit rather than covering the fees,” Mr Schutrups said.