Old-rate clients cry foul over mortgage price war
Even as UAE mortgage lenders have seemingly entered into a price-war to attract new borrowers in a bid to boost their respective loan books, existing mortgage holders are an unhappy lot as they are feeling ignored.
As reported by Emirates247.com earlier, a number of mortgage providers in the country have recently slashed their mortgage rates to entice new borrowers to re-enter the property market.
However, existing mortgage borrowers believe that dropping rates for new customers while keeping the same high rates for existing borrowers is unfair. “This two-tiered mortgage structure is unfair besides being illegal in many countries across the world,” said an existing mortgage borrower in Dubai who did not wish to be named.
A number of other existing borrowers that this website spoke to echoed the sentiment. “What kind of a message are banks trying to send by rolling out a red carpet for new customers while brushing old ones under the carpet?” quipped another borrower.
“Banks must reconsider interest rates of existing mortgage holders to the same attractive level which they are offering to the new property buyers now,” ‘Kamal’, a reader of this website, commented on an earlier article.
While banks and other lenders have recently announced rates that are as low as 4.99 per cent for new mortgages, some of the existing customers are paying as much as 9 per cent interest on their loans, which makes a huge difference to the EMI (equated monthly instalment) for a loan of the same amount and tenor.
While many of these new rates are also on offer to existing customers with other lenders, the devil is in the detail, with some lenders charging early settlement fee of up to 5 per cent if another bank decides to buy out the mortgage, which results in little or no savings for borrowers willing to make the switch.
On top of it, there is the 1 per cent processing fee – albeit reduced in some instances – that banks are charging customers still willing to make the switch, which in effect negates any remaining financial benefits arising out of switching lenders.
Besides, as the earlier quoted unnamed executive pointed out, “what happens if I am already a customer of the bank that is now offering a reduced mortgage rate? Is it fair that someone like me who has been with the bank for the past three years is being forced to evaluate switching to another lender while my bank is offering lower rates to new customers?”
Follow Emirates 24|7 on Google News.