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Wed 10 Mar 2010 05:41 PM

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HSBC drops mortgage rates to 6.75% from 8.5%

New rate to be offered to first time buyers & new customers who have 25% deposit.

HSBC drops mortgage rates to 6.75% from 8.5%
MORTGAGE RULES: To qualify, mortgage holders must have a minimum salary of AED20,000 ($5,445.14).(Getty Images)

HSBC has reduced its variable mortgage rate for new customers from 8.5 percent to 6.75 percent, the bank announced on Wednesday.

The new rate will be effective immediately and will be offered to first time buyers and new customers who have a 25 percent deposit. Some HSBC customers can avail of further reductions of up to 0.5 percent and current mortgage holders will have their rates reviewed on April 1.

 “We understand that investor confidence has been low, however we believe that owning a home continues to be an extremely important decision for residents of the UAE. It is also key to point out that in attractive locations across the UAE, buying a home can be cheaper than renting,” said Ishrat Kiyani, head of premier and wealth management, UAE at HSBC.

To qualify, mortgage holders must have a minimum salary of AED20,000 ($5,445.14). Loans are available for expatriates and nationals and are available for up to 25 years.

Last week, Abu Dhabi Finance introduced mortgages starting at 5.75 percent, which is the lowest rate currently in the emirates.

Earlier this year, Arabian Business revealed that the final cost of a UAE mortgage is now running as high as 143 percent of the original value of the loan.

Current interest rates in Dubai range from 6.5 to 8.5 percent, depending on the finance type, the lender, the project and the down payment.

This means that buyers taking out a AED2m ($544,484) mortgage over 25 years are likely to pay between AED4,079,244.31 ($1,110,542.38) and AED4,864,363.90 ($1,324,285.09) overall, when interest payments and other costs are added.

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Mark Towers 10 years ago

This is good news and at least sets out a positive tone for the banks future intentions. However, all banks need to pass on any reductions to existing customers who are feeling the pinch and would welcome some discounting on their monthly payments. I believe that the existing customer base ,on most banks mortgage book, is an accident waiting to happen and unless the Banks address this issue soon we will unfortunately move closer to a period where the most used word in the property section is 'foreclosure'.