- Borrowers are now able to continue with their budget plans without having to make any changes.
- The Fed increased the rate by 0.25 percent in July, and the UAE Central Bank did the same.
- Dubai is setting the pace for off-plan sales, with a sizable chunk completed through cash purchases.
Borrowers are now able to continue with their budget plans without having to make any changes to them thanks to the US Federal Reserve’s decision not to increase interest rates in the UAE for a second time since June.
Although no decision was taken at its June meeting, the Fed increased the rate by 0.25 percent in July, and the UAE Central Bank did the same. There have been 11 interest rate increases since March 2022, with one buyer seeing a rate increase to nearly 9% on the remaining debt.
US Fed rate
Banks in the UAE are closely monitoring their loan books, and they have not observed any significant instances of mortgage or other borrowers having trouble making their payments.
Despite the increasing interest rates, loan processing, including new mortgage approvals, is going smoothly. Dubai is setting the pace for off-plan sales, with a sizable chunk completed through cash purchases or developer-supported financing. Mortgages may come into play, but only relatively late in the project’s development.
With a significant influx of new orders and the ability to charge more for their goods and services, businesses in the UAE have benefited from the US Fed rate increases and their reflection in UAE lending rates.
Businesses must, however, proceed with prudence because they are compelled to provide customers with credit. According to James Mathew, CEO and Managing Partner of UHY James Chartered Accountants, companies should manage supplier credit limits, optimize the procurement process, keep an eye on inventory levels, and reduce the average credit length given to consumers.
Some banks in the UAE have marginally raised their interest rates on unpaid balances and credit card fees. Monthly interest rates on balances increased from 2.5–3% in 2022 to 3.25–1.85% in 2023.
When it comes to credit cards, banks might be cautious about rate increases, but they might review their credit policy and lower the credit limits they grant customers.
After the Fed announced late on Wednesday that it would keep interest rates unchanged for the time being, the US and Asian stock markets fell. DeVere Group CEO Nigel Green thinks the Fed hasn’t finished raising rates yet and anticipates that it will start doing so again in November.
