Refinancing boom masks slowdown in Dubai home purchases; lenders pivot to equity deals

Dubai’s mortgage market has undergone a structural shift in how lending activity is actually distributed. Purchase volumes have retreated from their 2025 peaks, but refinancing and equity-release transactions have surged, reshaping the operational relationship between lenders and borrowers and revealing a new demand pattern driven by existing homeowners rather than first-time buyers alone.

The numbers tell a clear story. Mortgage-backed purchase transactions across the UAE declined sharply in the second quarter of 2026, with 8,822 transactions worth AED 42.58 billion recorded, compared to 13,604 transactions worth AED 42.2 billion a year earlier, a 35 percent drop in volume. Total value held steady, meaning average deal sizes have risen substantially. That pattern continued into the third quarter, with 5,802 deals valued at AED 25.21 billion, down from over 7,100 deals worth AED 13 billion in the corresponding 2025 period.

Additional reference context is available at https://www.tradingview.com/news/reuters.com,2026-09-17:newsml_Zaw63K5xK:0-dubai-mortgage-refinancing-surges-as-property-purchase-volumes-ease/.

Sam Amidi, Sales Director of Mortgage Finder at Property Finder Group, attributed the shift to two converging forces. Overall mortgage inquiries dipped about 1.9 percent year-on-year in the second quarter, yet approvals rose around 33 percent over the same period. The explanation lies in the composition of those inquiries: refinancing and equity-release requests grew 2.5 times year-on-year, driven by better-informed borrowers and by banks returning to more normal lending practices after a cautious stretch earlier in the year. “Both of these factors contribute to higher conversion rates,” Amidi said. Mortgage loan sizes rose roughly 17 percent year-on-year in the first half of 2026, largely reflecting higher property values, particularly for units nearing handover.

The refinancing surge has a specific operational trigger. Dhiren Gupta, Managing Director of 4C Mortgages Consultancy, explained that borrowers who locked in rates during 2022-23 are now rolling onto variable rates tied to EIBOR, typically between 5.25 percent and 6.25 percent. New fixed-rate buyout offers, by contrast, have brought rates down to between 3.79 percent and 4.39 percent. That spread is wide enough to make switching highly attractive. For an AED 1.5 million mortgage, refinancing from 5.5 percent to 4 percent generates monthly savings of around AED 1,200 to AED 1,500, allowing borrowers to recover switching costs within four to eight months.

Central Bank regulations cap early settlement fees at 1 percent of the outstanding balance or AED 10,000, keeping refinancing operationally feasible for most borrowers. Haider Tuaima, Managing Director and Head of Real Estate at Valustrat, reported that refinancing and mortgage top-ups made up about 50 percent of all home loans in the second quarter to date, up 15.9 percent on a quarterly basis and 4.8 percent year-on-year. Apartments represented roughly 63 percent of mortgage transactions; villas accounted for 30 percent.

Meanwhile, refinancing is enabling a secondary dynamic: cash-out transactions for property improvements and reinvestment. Lenders are offering cash-out refinancing up to 75-80 percent loan-to-value, allowing homeowners to extract equity from appreciated assets. Rakesh Mirchandani, Co-Founder and CEO of RNR International Real Estate, estimated that 10-15 percent of his firm’s mortgage-related inquiries this year concern refinancing or buyouts, driven by rate differences, bank buyout campaigns, and equity access. He cited one RNR client who refinanced and released AED 5 million at a fixed 4.69 percent, then deployed that capital into ready units priced 10-20 percent below market value, yielding gross rental returns of 9-10 percent.

Purchase-side activity has shown its own volatility. Kunal Puri, Founder and CEO of La Capitale Group, cited Dubai REST data showing mortgage activity dropped to 2,551 properties in May amid regional uncertainty, then rebounded to 4,402 in July as lender caution eased. Three operational factors drove that recovery: fixed borrowing rates falling to around 3.75 percent for a one-year term, the First Time Home Buyer Programme generating over AED 5 billion in transaction value from more than 3,200 buyers, and the June 2026 launch of Flexi Rent, which freed up tenant cash flow for property deposits.

The composition of financed transactions has also shifted. RNR International reported that 65-70 percent of its financed transactions now involve end-users, up from about 55 percent 18 months ago, while investors account for 30-35 percent compared to 45 percent previously. About 40 percent of the firm’s ready-market closings now involve bank financing, against 30 percent a year ago. Its registrations from May to August 2026 show concentrated financing demand in mid-market properties: studios priced at AED 800,000-900,000, one-bedroom apartments at AED 1.3 million to AED 2.5 million, and family-oriented three-bedroom villas from AED 1.4 million.

The open question is whether the rate environment that is powering the refinancing wave holds. If fixed-rate buyout offers narrow as EIBOR moves, the conversion advantage that has driven approval rates higher could compress quickly, and lenders will need to find a new operational equilibrium.