As interest rates and borrowing costs rise in the UAE, cash purchases have increased their share of Dubai’s property market. However, data from some real estate brokerages shows that bank mortgages still finance more than half of their transactions.

According to a report by real estate brokerage Betterhomes, cash purchases accounted for 44% of the company’s residential transactions in the third quarter of 2026, up from 36% in the second quarter.

By contrast, the share of purchases financed through mortgages fell from 64% in the second quarter to 56% in the third quarter. However, this remained above the 50% recorded in the first quarter of the year.

The rise in cash buyers comes as borrowing costs face further upward pressure following the Central Bank of the UAE’s decision to raise its base rate from 3.65% to 3.90%. The change took effect on September 17, 2026.

Betterhomes said the increase in cash purchases indicates that a significant number of buyers can complete property transactions without relying on bank financing, which could help maintain relative market stability as borrowing costs rise.

However, bank mortgages continue to play an important role in financing home purchases in Dubai.

Mortgage advisory firm Lomond said UAE banks remain keen to lend to resident and non-resident buyers, with competition for new customers continuing, particularly in refinancing and mortgage transfers between banks.

How do higher interest rates affect homebuyers?

The Central Bank of the UAE’s interest-rate decision in September 2026 coincided with a shift in US monetary policy.

The US Federal Reserve raised its benchmark interest rate by 0.25 percentage points on September 16, 2026, taking its target range to 3.75% to 4%.

Because the UAE dirham is pegged to the US dollar, changes in US interest rates also affect financing costs in the UAE.

The Emirates Interbank Offered Rate, known as EIBOR, also typically responds to changes in monetary policy.

After raising the base rate in September, the Central Bank of the UAE decided on October 28 to keep it unchanged at 3.90%.

According to Betterhomes, the recent changes are not expected to result in a significant increase in fixed mortgage rates, although minor adjustments may occur in the fourth quarter.

However, the immediate effect may be felt more in the amount buyers qualify to borrow rather than necessarily in the mortgage rates offered by banks.

Buyers may qualify for smaller mortgages

Experts expect UAE banks to increase the assumed interest rates used in mortgage affordability stress tests.

Banks use these tests to assess applicants’ ability to make repayments even if interest rates rise in the future.

Higher assumed rates in these assessments could reduce the amount buyers qualify to borrow, even if actual mortgage rates change only slightly.

According to Betterhomes, buyers who had not received a final mortgage offer from a bank by the end of October 2026 could face revised offers.

Adrian Russo, head of mortgages at Lomond, which provides mortgage advisory and financing services in partnership with Betterhomes in the UAE, said: “This is a limited change, and we do not expect major movements in rates for mainstream fixed-rate mortgage products, although minor rate adjustments are anticipated.”

Borrowers with fixed-rate mortgages are generally unaffected by interest-rate changes during the fixed-rate period.

However, those with variable-rate mortgages may see their monthly repayments change when their mortgage rate is reviewed.

Some banks are also offering refinancing incentives to homeowners whose fixed-rate mortgage periods have ended.

These incentives include waivers on application assessment and processing fees, property valuation charges and reimbursement of early settlement fees on previous mortgages.

Cash purchases have a larger share of Dubai’s overall property market

Although 44% of Betterhomes’ residential transactions in the third quarter of 2026 were completed without bank financing, the share of such deals across Dubai’s overall property market was considerably higher.

One reason for the difference is the large share of off-plan transactions and the presence of buyers who do not use conventional bank mortgages to purchase property.

Saad Hussain, chief executive of Alaia Developments, warned that the increase in cash purchases should not be attributed solely to changes in interest rates.

Referring to the structure of Dubai’s property market and its high volume of off-plan transactions, he said: “The high share of cash purchases in Dubai cannot be attributed to interest rates alone.”

According to research by Hamptons, about 83% of Dubai’s residential transactions in December 2025 were completed without mortgage financing.

That month, 14,582 transactions were completed without bank mortgages, compared with 3,014 mortgage-financed deals.

By March 2026, the share of transactions without bank financing had fallen to about 76%, with 9,857 non-mortgage deals compared with 3,108 mortgage-financed transactions.

One reason for the high proportion of transactions without bank mortgages is the size of Dubai’s off-plan property market.

In this segment, developers typically offer instalment payment plans that allow buyers to pay for properties over several years without necessarily obtaining a bank mortgage.

Therefore, cash transactions in these statistics do not necessarily involve paying the full property price upfront. Instead, they refer to purchases completed without a bank mortgage.

According to data from Engel & Völkers, off-plan properties accounted for about 71.3% of all residential transactions in Dubai during the first half of 2026.

This distinction is particularly important when examining the ready-property market, where bank mortgages play a more prominent role.

An analysis by Reidin in August 2026 showed that about 47% of residential purchases in the ready-property market were financed through bank mortgages, while the remaining 53% were completed without mortgage financing.

How much do lower mortgage rates benefit buyers?

Saad Hussain said competition among UAE banks in 2026 had made fixed-rate mortgages more attractive.

According to Hussain, some banks are advertising initial fixed rates starting at about 3.75%, while three-year mortgage packages are also available at rates of around 3.89% to 4%.

However, the final mortgage rate depends on the applicant’s circumstances, repayment capacity and the lending bank’s criteria.

To illustrate the effect of changing interest rates on home-buying costs, Hussain provided a calculation based on three-month EIBOR plus a bank margin of one percentage point.

On this basis, the illustrative mortgage rate was about 6.30% in the first quarter of 2024, 5.30% in the first quarter of 2025 and 4.74% in the second quarter of 2026.

These figures are provided solely to compare financing costs across different periods and do not represent the actual mortgage rate available to every applicant.

Example: Mortgage repayments on an AED 2 million home

To buy a property worth AED 2 million with a 20% down payment, the buyer would need to pay AED 400,000 and take out a mortgage for the remaining AED 1.6 million.

For a 25-year mortgage term, monthly repayments would vary according to the interest rate as follows:

- At an annual interest rate of 6.30%, the monthly repayment would be about AED 10,604.

- At an annual interest rate of 5.30%, the monthly repayment would fall to about AED 9,635.

- At an annual interest rate of 4.74%, the monthly repayment would be about AED 9,113.

These calculations assume that the interest rate remains unchanged throughout the 25-year term and that the mortgage is repaid in equal instalments. They do not include additional borrowing costs.

Based on these calculations, the difference between the rates used in this example for the first quarter of 2024 and the second quarter of 2026 would reduce the monthly repayment by about AED 1,491.

This would amount to annual savings of nearly AED 17,900.

However, Hussain stressed that borrowers who previously took out fixed-rate mortgages would not necessarily benefit automatically from lower interest rates.

He also warned that lower financing costs do not always translate into greater housing affordability.

According to Hussain, rising property prices, buyers’ income levels and transaction-related costs could offset some of the benefits of lower interest rates.

The outlook for Dubai’s mortgage market

Experts expect bank mortgages to remain an important source of financing for residential property transactions in Dubai, even if the share of buyers purchasing without bank loans increases.

At the same time, banks may adopt stricter assessments of applicants’ repayment capacity, potentially affecting the maximum amount buyers can borrow.

Prospective homebuyers are therefore advised to assess their financial position before committing to a property purchase and to confirm the approved loan amount, interest rate, repayment terms and other associated costs.

According to the report, the growing share of transactions completed without bank financing shows that Dubai’s property market continues to attract buyers who do not depend on bank loans.

However, mortgages continue to play a significant role in financing home purchases in Dubai, particularly in the ready-property market and in transactions handled by some brokerages.