- Borrowers who have already paid the 3% settlement fee are eligible for a refund from their bank, within 30 days
- This news will encourage borrowers to switch their mortgage to lenders offering better interest rates
- This decision will result in an increase in buyout and remortgaging activity
Dubai: The UAE Central Bank has issued a formal communication announcing that banks can no longer charge a 3% early settlement fee for borrowers who want to exit their mortgage early.
The Central Bank further announced that going forward, banks can only charge borrowers a 1% early settlement fee on the outstanding mortgage amount or AED 10,000 – whichever is less.
The update from the Central Bank also indicated that anyone who has been made to pay the 3% settlement fee is eligible for a refund from their bank, within 30 days. Mortgage Finder, an independent mortgage consultancy part of the Property Finder Group, urges clients to contact their banks if they believe this may apply to them.
“The news from the Central Bank is positive as it now opens up opportunities for those borrowers who were paying a higher rate of interest on their mortgage to find a better deal and save money. The recent interest rate cuts that we have seen are pushing banks to be more competitive with their products. We have seen a decrease in mortgage rates since the beginning of the year. All of this is great news for those borrowers who were stuck with mortgage products that did not reflect the changing market,” said Chris Schutrups, Managing Director, Mortgage Finder.
In 2018, the UAE Central Bank had announced that lenders could charge up to 3% of the outstanding home loan amount on clients who exit their mortgage early. The banks had to prove financial loss in order to charge the full 3%. The exit penalties varied from one bank to the other as they all implemented the ruling in different ways, with some even implementing the charge when clients went on to sell their properties.
This change in legislation affected the buyout and remortgaging market heavily as borrowers were less inclined to move their mortgage to another bank to get a better rate or product as the costs of doing so outweighed the possible savings that could be had by moving. This meant that many borrowers were locked in with uncompetitive rates, negatively affecting their disposable income. For those with investment properties, this was made all the more difficult as they also experienced a decrease in their return on investment.
Further, for those borrowers whose banks applied the 3% charge when selling property, this update will be much welcome as the costs associated with selling have now significantly reduced.
-Ends-
About Property Finder – www.propertyfinder.ae
Property Finder is the leading property portal in the MENA region and Turkey that facilitates the house-hunting journey for both buyers and renters.
Founded in 2007, the website has evolved over the years as the go-to platform for developers, real estate brokerages, and house hunters to make informed decisions on all things real estate.
A UAE-born start-up, Property Finder has branched out of the country’s shores and operates in a total of seven markets, including Qatar, Bahrain, Saudi Arabia, Lebanon, Egypt, and Morocco, and has a significant stake in the second-largest property portal in Turkey, which has over 6 million monthly visitors and more than 18,000 real estate agents.
US private equity firm General Atlantic led Property Finder’s latest round of investment of a total of $120 million in 2018. This is being used to hire further exceptional talent and investing in its technology and product capabilities.
The property portal employs over 450 employees globally, of which 204 people work out of its Dubai office, and generates over six million monthly visits as a Group.
In April 2019, Property Finder announced the acquisition of JRD Group, following an increased investment in Turkish portal Zingat.
In 2014, Property Finder acquired eSimsar.com, the top property portal in Saudi Arabia, while in 2013, the Group bought out realestate.com.lb, the number 1 property portal in Lebanon, and lastly, the acquisition of Selektimmo, a Moroccan portal, to pad out sarouty.ma, Property Finder’s Moroccan offering, in 2016.
For media enquiries, please contact Anna Lucas Southgate
anna@propertyfinder.ae
+971 55 115 9971
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