Mortgage middlemen are cashing in as property transactions boom and homeowners attempt to generate better terms on property deals.
Banks say that referrals from mortgage brokers and consultants are accounting for an increasing share of their business. This has convinced many mortgage intermediaries to increase staff numbers, even at a time when cash buyers account for the majority of transactions.
Before property prices started to tumble in Dubai in late 2008, customers were much less discerning about the small print of their mortgages, said Jean-Luc Desbois, the managing director of Home Matters, a mortgage consultancy. That has now changed.
“Consumers now are looking for better value for money,” he said. “Not just lower interest rates, but terms and conditions and exit fees.”
Home Matters is not the only intermediary which is growing in size as momentum builds in the property market.
Independent Finance, a mortgage consultancy, tripled in size last year. Sam Wani, the company’s general manager, expects the firm to double again in size this year.
Although excessive leverage is a problem, he says that Independent Finance can boast a 95 per cent preapproval rate for customers it wishes to take on.
“The client is thoroughly vetted before we go for a mortgage,” he said. “That’s worked in our favour.”
With more than 30 banks active in the mortgage market, each offering several products, the amount of consumer choice can be bewildering, said Gordon Robertson, a director at InvestME Financial Services, which is expanding into the mortgage consultancy industry.
Mr Robertson said his company identified a gap in the market for mortgage consultancies able to advise on aspects of Sharialaw.
Starting from scratch in August, Mr Robertson projects that the firm will soon advise on about 30 mortgages per month.
Requirements for mortgage financing are being fuelled by substantial increases in property values across Dubai and Abu Dhabi. The second quarter of this year marked the fourth consecutive quarter of increases in residential property prices in Dubai, according to a research note from Standard Chartered.
Transaction values have accelerated sharply within the first five months of this year, according to the bank’s research. In theory that allows brokers to take a larger cut.
Part of the demand is coming from residents looking to cut their housing costs buying their properties instead of renting, Mr Wani said.
But deals are also being driven by existing homeowners seeking to remortgage properties purchased at a time when interest rates were much higher.
Many customers will be encouraged to remortgage existing properties and lock in lower payments before the US Federal Reserve raises interest rates and UAE monetary policy catches up.
Emirates Interbank Offered Rates, also known as Eibor, are currently at record lows as a result of a surge of liquidity on local banks’ balance sheets and the effects of quantitative easing by the Fed on US treasury rates.
The US central bank is widely expected to slow the pace of its monthly asset purchases later this year, withdrawing liquidity from the global financial system.
The one-year Eibor rate is currently 1.26143 per cent. But taking advantage of lower rates is easier said than done, as many banks make changing a mortgage to a competitor prohibitively expensive.
Of 52 mortgage products tracked by Souqalmal.com, a price comparison website, only six do not charge early settlement fees. The rest range between 1 and 5 per cent.
Making use of a mortgage broker may be able to help a customer lower these exit fees, allowing for greater savings in the long run, Mr Wani added.
“The remortgage penalty is still there,” he said. “We’ve been lobbying hard with the banks whereby we can get you a mortgage where no or very little remortgage penalties.”