Recent reports from the Fed (US Federal Reserve) suggest some confidence that interest rates could fall in the range of 3% this year. With the UAE Dirham pegged to the US Dollar, this will have an impact on mortgage rates in the country presenting a great opportunity for buyers to lock in lower mortgage rates than we've seen in the last 12-18 months. At the same time, falling interest rates will increase buying power of prospective property purchasers, and price more people into the market.

Decreasing mortgage interest rates can have a profound impact on the buying capacity of individuals and families looking to invest in real estate. Falling interest rates directly influence the affordability of homes and, consequently, the overall dynamics of the real estate market.

Here are several key ways in which a decrease in mortgage interest rates can affect buying capacity:

1) More Mortgage Approvals

At Holo, we've seen lenders respond to falling interest rates and can offer fixed-rate products as low as 3.99% in January 2024. In 2023 the average fixed term interest rate was 4.99%. Lenders stress test a mortgage application against the current financial obligations of an applicant and a worst case scenario for a jump in interest rates. A lower interest rate with a stress rate applied may contribute to the number of finance approvals, making home ownership a reality for previously declined applicants.

2) Lower Monthly Payments

One of the most immediate and tangible effects of decreasing mortgage interest rates is the reduction in monthly mortgage payments. As interest rates decline, borrowers can secure loans at lower costs, resulting in more affordable monthly payments. This, in turn, expands the pool of prospective homebuyers who can comfortably manage their mortgage obligations without straining their financial resources.

3) Increased Purchasing Power

Lower interest rates translate into increased purchasing power for potential homebuyers. As the cost of borrowing decreases, individuals may qualify for larger loan amounts while keeping their monthly payments relatively stable. This extended purchasing power empowers buyers to consider properties that might have been financially out of reach during periods of higher interest rates. The knock-on effect may be as market demand is stimulated, property prices could increase. Timing when to take advantage of lower rates is everything.

4) Refinancing and Buyout Opportunities

Existing homeowners can also benefit from declining interest rates through mortgage refinancing. Lower rates present an opportunity for homeowners to refinance their existing mortgages, potentially securing more favorable terms and reducing their monthly payments. This, in turn, frees up additional funds that homeowners can redirect toward other investments or expenses.

At Holo, we can help you explore all your mortgage options. Whether you are looking for a mortgage in Dubai or Abu Dhabi, use our online mortgage calculator to help you estimate your monthly mortgage repayment.

If you're ready to take advantage of falling interest rates, our digital mortgage services and online application are designed to make the finance process as easy as possible.

Prefer a human touch? Don't worry we have you covered. Our team of mortgage specialists is on hand to help walk you through everything and answer all your mortgage frequently asked questions , to make your journey seamless an d smooth. And our team of dedicated Buyers Concierge can help take the headache out of your property search.

Excited to see whether lower mortgage interest rates can make your homeownership goals achievable? Take the first step at useholo.com to get started.