Demand for financing has rebounded… and real estate loans are at the forefront

Two bankers expected that the demand for various financing would witness a noticeable recovery, especially real estate financing, after the Central Bank, the day before yesterday, made a new reduction in the main interest rate by 25 basis points, equivalent to a quarter of a percent, coinciding with a similar step taken by the US Federal Reserve, due to… Policy of pegging the dirham to the dollar.

They stated to “Emirates Today” that it is expected that real estate financing installments will witness a decrease in the value due monthly, as the interest on it is linked to “EIBOR” (the interest rate on transactions between banks), up and down.

The Central Bank announced the night before last that it had decided to reduce the “base rate” on overnight deposit facilities by 25 basis points, from 4.65% to 4.40%, as of yesterday.

This decision comes after the US Federal Reserve announced that it would reduce the interest rate on reserve balances by 25 basis points at its meeting held on Wednesday.

The Central Bank also decided to keep the rate applicable to borrowing short-term liquidity from the Central Bank through all existing credit facilities at 50 basis points above the base rate.

The base rate, which is linked to the interest rate on reserve balances approved by the US Federal Reserve, determines the general stance of monetary policy, and also provides a minimum effective interest rate for overnight money market rates in the country.

In response, banking expert, Ahmed Youssef, said that the new cut announced by the Central Bank the day before yesterday constitutes a major incentive to stimulate various economic sectors supported by increased demand for various financing, especially real estate financing, which is expected to rise significantly, raising the demand for various financing. Real estate prices result from the availability of financing.

Youssef stated that the policy of pegging the dirham to the dollar paves the way for further reductions during the coming period, specifically during the year 2025, as the US Federal Reserve is expected to make at least two new reductions, if not more, pointing out that the Federal Reserve seeks to ease the strict monetary policy. Which it has adopted since 2020 after the intensity of inflation calmed down significantly, and there became an urgent need to stimulate the markets.

He pointed out that the increase in demand for loans also stimulates consumption, which stimulates the retail sectors and increases economic growth rates.

For his part, banking expert, Ahmed Arafat, said that the step of the US Federal Reserve, and then the UAE Central Bank, to reduce interest rates is a very positive thing for the economy, as it is expected that the entire next year will witness successive interest cuts, which constitutes a major jump in demand for financing. Especially real estate, which is the biggest beneficiary as a result of encouraging customers to buy a property, whether for housing or investment, which creates a strong market. He added that the supply of real estate in the local market is good, which paves the way for a boom in buying and selling, supported by the reduction in the interest rate on financing.

Arafat stressed that there is a great demand from different nationalities to buy real estate in the Emirates, in light of the availability of free ownership, and the state’s stability and high standard of living, pointing out that there is also a trend to buy instead of rent, which supports the real estate sector at the level of the seven emirates of the country.