In 2024, loans, including mortgages, car financing, and credit cards, are expected to become more affordable in the UAE. This is due to the country following the US’s lead in terms of interest rates. The UAE has its currency, the dirham, pegged to the US dollar since 1997, which means the exchange rate between the two currencies is fixed. Consequently, the UAE has to adjust its monetary policy in line with the US. The Federal Reserve in the US is likely to cut interest rates by 75 basis points in 2024, which the UAE Central Bank (CBUAE) is expected to mirror. This could lead to a decrease in the base rate to 4.65 percent by the end of 2024, the lowest level since 2018.
Such a decline in interest rates directly impacts consumers and banks in the UAE. Borrowers will benefit from reduced interest payments and increased disposable income. This applies to both existing borrowers, who could refinance their loans at lower rates, and new borrowers, who could access cheaper credit. UAE banks will also benefit as lower interest rates improve their net interest margin and profitability.
However, there are potential negative implications such as a higher cost of risk for banks due to possible loan defaults, a potential increase in the cost of funding, and a possible slowdown in loan growth.
Now, let’s proceed with creating an outline for your blog as a mortgage consultant in the UAE. We will focus on these trends and their implications for your audience.
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