6% UAE mortgage rate from HSBC a winner

Mortgage rates from HSBC have been slashed by one per cent in the UAE today. HSBC Middle East Limited has launched a six per cent mortgage rate for low loan-to-value customers. It guarantees to follow the Emirates Interbank Offered Rate for the life of the loan.

Home loan rates have been on a falling trend in the UAE where interest rates track the US dollar because of the dollar peg. The new HSBC mortgage offer is one of the cheapest in the market and is good for market confidence. House prices in Dubai are up 78 per cent in the past year, according to Colliers International.

The new mortgage from HSBC will be benchmarked to three months EIBOR plus a fixed margin depending on the loan to value, and for up to 60 per cent LTV rates start from three month EIBOR plus four per cent or six per cent.

The new mortgage guarantees a rate review every quarter on 1st January, 1st April, 1st July, 1st October and the rate will be automatically re-set in line with the actual current three month EIBOR rate.

The bank’s existing mortgage product offers a variable interest rate mortgage. As of 1st July the interest rates on this product will be reduced by 100 basis points for all customers. HSBC guarantees that going forward this mortgage rate will also be reviewed on a quarterly basis.

Customers who are interested in converting their current “Flexi-Home” variable interest rate mortgages to the EIBOR based mortgage product can do so free of charge until 30th September 2008. Existing HSBC Amanah Al Asaas home finance customers will also get a reduced profit rate of 1% from July 2008.

Speaking about the launch, Gul Khan, Regional Head of Premier, Home Finance and Insurance said, “The market has become considerably more competitive since we launched our mortgage operation here over five years ago though mortgage choice still remains limited. Our expanded product offering aims to extend this choice so our customers can take advantage of the booming property markets and prevailing low interest rates.’

The loan is available for both house purchases and re-mortgages, and gives re-mortgage customers the opportunity of realising up to 75 per cent of capital tied up in their property. And the HSBC EIBOR based mortgage is open to both employed and self-employed customers.

This is certainly a long way from the days when HSBC lent only to selected Nakheel and Emaar projects in Dubai and marks a further maturing of the local mortgage market. Mortgage margins are still fat, however, and could be trimmed further in the future.