Lower interest rates on domestic financing at 2.41%

21% increase in bank deposits with the central bank (Union)

Yousef Al-Bastanji (Abu Dhabi)

The 3-month AED financing rate fell to 2.61% yesterday, compared to 2.61% in early July. This is the base rate adopted by most UAE banks for charging interest on personal loans and mortgages, which reduces monthly deductions for borrowers. Banks in the domestic market, stimulate the increase of bank financing during the next stage.
Data from the central bank show that the interest rate in dirham at three months in interbank transactions fell yesterday to its lowest level in nearly 15 months.
Banks review the interest rate formula every three months, often to calculate the value of long-term loans, in particular mortgages, for periods of up to 25 years, and determine accordingly the division of the monthly payment deducted from the borrower. The interest rate at 3 months was close to 3% at the beginning of the year, which resulted in a 10% to 15% increase in monthly premiums deducted from borrowers compared to 2016.
The interest rate on the dirham is based on the US dollar rate because of the correlation between the two currencies, but the margin of the decline in the interest rate on the dirham shows a significant increase in the available liquidity for the country's banks, which leads them to reduce the loan rate.
According to central bank data, cash deposits of banks operating in the UAE from the Central Bank increased by more than 21 percent in June 2019 to reach 20.5 billion dirhams, compared with 16.9 billion in May. 2019.
The data shows that the balance of current accounts of banks and bank deposits with the Central Bank has reached one of their highest historical levels to reach 342 billion dirhams spread over 204 billion current accounts and 138 billion dirhams. deposits, an increase of about 8 billion dirhams compared to the balance of May, which confirms the strength of the banking sector in the country and provides for a period of growth of economic activity in general and financing real estate market, especially in the domestic market, in the coming months.