U.S. Mortgage Rates Dip Below 6%: What It Means for Global Property Investors

Mortgage rates in the U.S. have fallen below 6% for the first time since 2022, dropping to 5.99% this week. Even though the decrease may seem small, it is having an effect. As homeowners are beginning to realize that their rates are higher than they used to be, many are rushing to refinance before rates increase and before the spring real estate season kicks into full gear. Currently, the rush to refinance is so strong that it is outpacing homebuyers attempting to purchase a home. While there is a flurry of refinancing activity, the homebuyers appear to be approaching with caution.

BASICS MORTGAGE RATES ARE LOW Homeowners whose mortgages predate this year’s dramatic short-term surge in rates to the highest in 16 years now have what could be a unique chance to lower the monthly bills on their homes. Refis have surged 130% from last year, as we detail in the chart of the week. The surge is delivering what could be a meaningful lift to the living standards of a large number of homeowners, by enabling them to refinance to lower rates, which could cut monthly mortgage payments by 10% of after-exemption income or more. On the other hand, rate cuts don’t yet seem to be doing much for new home purchases. With mortgage applications for new homes rising just 8% from year earlier, roughly half as fast as in previous rate environments, potential homebuyers seem to be hesitating, even though rates remain higher than they were when the pace of purchases was surging earlier this year.

Rates are coming down, and that’s a great opportunity for investors and buyers. With rates dropping, the cost of borrowing money is coming down too, resulting in higher affordability. Here’s how the rates changes affect affordability in the US. Using our house tracker calculator, we plugged in the median US home price of $400,000. With a 20% down payment, the monthly principal and interest payment on the median priced home in the US decreased by almost $190 when comparing the current rates to the rates from last year. Increasing purchasing power or affording more cash flow is a great way to balance out your desire for life and the desired returns on your investment.

Though rates remain under 6% — for now, at least — that doesn’t mean it’s easy for buyers. High home prices and low inventory continue to be a major hurdle for many consumers who are shopping around for the best deal. And it’s unclear whether the rates will remain low enough to have an actual impact on the market. Buyers will have to wait and see if the prices drop and the homes start rolling in.

So what does the US mortgage shift mean for international investors of Dubai real estate? There will not be an immediate ripple affect on mortgage products in the UAE. What will occur is that a change in mortgage products in one of the world’s largest economies will have repercussions in the wider market, and potentially impact investor confidence and flows of foreign currency into a market such as Dubai. Furthermore, any drop in rates may ease the impact of the USD on the global currency market and subsequently make cross-border investment such as that in off-plan and luxury projects in Dubai more viable.

Practical Investment Insights for UAE Buyers & Investors:

1. Watch global borrowing cost trends Rates on US mortgages have come down, which could be a signal that global borrowing costs are also decreasing, which could in turn impact lending and mortgage rates in Dubai.
2. Refinancing opportunity The market may see investors that hold US dollar denominated mortgages in the US, looking to refinance in order to better yield on their cash to purchase more real estate here in Dubai.
3. Inventory movements to follow - While sellers in other emirates are adjusting to the new commission rates, the demand and supply scenarios in Dubai are something to keep an eye on.
4. Cross-Border Portfolio Diversification - With yields moving in differing ways across regions, we are encouraging clients to diversify their fixed income portfolios across markets such as Dubai and the U.S. in order to spread risk.

A mortgage rate that falls below 6% is more than a number — it’s a refinancing trigger and a purchasing incentive. For global investors in Dubai who are looking for smarter, more liquid investment opportunities, the rate that mortgages carry in the US is definitely something to consider when looking beyond the horizon.