More respite for homeowners as rates cut again
There was more good news for UAE homeowners on Tuesday as the Emirates' central bank cut interest rates for a second time following the US Federal Reserve decision last week to slash its benchmark rate for the first time in more than four years.
The UAE lowered its three-month Certificate of Deposit (CD) interest rate by 10 basis points after speculation it might revalue its currency took the dollar-pegged dirham to a five-year high on Monday.
The move means those with property in the Emirates will pay less on their mortgage than before.
The reduction takes rate cuts over the past week to 0.25 of a percentage point and follows the 50 basis point cut to 4.75% made by the US Federal Reserve last week. The UAE's 3-month CD rate is now 4.7%.
"The bank wants to make it less attractive to hold UAE dirhams but it also does not want to match the Fed cut," said Giyas Gokkent, head of research at National Bank of Abu Dhabi (NBAD).
The UAE dirham rose to a five-year high on Monday at 3.6682 per dollar as speculation Saudi Arabia might revalue its currency spilled over into other Gulf Arab oil producers' currencies. The dirham was quoted at 3.6701 at 0953 GMT on Tuesday.
"The bank is uncomfortable with people taking positions on a revaluation so they want to make it less attractive," Gokkent said.
The UAE, which does not have a benchmark interest rate, also cut its six and nine-month CD rates by 10 basis points to 4.8% and 4.7% respectively. It left the one-week and one-month rates unchanged.
CD rates are used by banks in the UAE to determine interbank rates.
Last week the UAE lowered its one-week, one-month and three-month CD rates by 15 basis points, and its six-month and nine-month rates by 20 basis points.
The UAE is the most likely among the five Gulf Arab states with a dollar peg to revalue its currency, a Reuters poll of 17 analysts showed this month. Source
The UAE lowered its three-month Certificate of Deposit (CD) interest rate by 10 basis points after speculation it might revalue its currency took the dollar-pegged dirham to a five-year high on Monday.
The move means those with property in the Emirates will pay less on their mortgage than before.
The reduction takes rate cuts over the past week to 0.25 of a percentage point and follows the 50 basis point cut to 4.75% made by the US Federal Reserve last week. The UAE's 3-month CD rate is now 4.7%.
"The bank wants to make it less attractive to hold UAE dirhams but it also does not want to match the Fed cut," said Giyas Gokkent, head of research at National Bank of Abu Dhabi (NBAD).
The UAE dirham rose to a five-year high on Monday at 3.6682 per dollar as speculation Saudi Arabia might revalue its currency spilled over into other Gulf Arab oil producers' currencies. The dirham was quoted at 3.6701 at 0953 GMT on Tuesday.
"The bank is uncomfortable with people taking positions on a revaluation so they want to make it less attractive," Gokkent said.
The UAE, which does not have a benchmark interest rate, also cut its six and nine-month CD rates by 10 basis points to 4.8% and 4.7% respectively. It left the one-week and one-month rates unchanged.
CD rates are used by banks in the UAE to determine interbank rates.
Last week the UAE lowered its one-week, one-month and three-month CD rates by 15 basis points, and its six-month and nine-month rates by 20 basis points.
The UAE is the most likely among the five Gulf Arab states with a dollar peg to revalue its currency, a Reuters poll of 17 analysts showed this month. Source
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