MONEY CLINIC

I have several mortgaged investment properties in the US, eastern Europe, the UK and the UAE. The talk worrying me at the moment is of interest rate increases. Are my mortgages about to get more expensive? JH, Dubai

Readers express concern at mortgage rate increases after US Fed rate rise,

Expert 1: Brendan Kennelly senior mortgage consultant, mortgagefinder.ae

Mortgage payments for your US and UAE properties could become more expensive after the US Federal Reserve’s decision to raise interest rates. This should not prove too dramatic but if you want certainty of cost for your mortgages I suggest a fixed rate home loan to guard against any rate fluctuations.

In relation to the eastern European and UK properties and mortgages, interest rates in these areas are at record lows so these shouldn’t increase anytime soon. Again if you want certainty of cost, a fixed rate is the best way to proceed. I would recommend speaking to an independent mortgage consultant to review your mortgages and your options. There could be the possibility of releasing equity from properties in low interest rate regions to repay more expensive mortgages.

Exchange rates would have to be considered in such scenarios.

Assuming the properties are rented out, it may be an idea to utilise any surplus income to repay the mortgages early, thus reducing interest costs.

Expert 2: Dhiren Gupta managing director, 4C Mortgage Consultancy

Certainly, the Federal Reserve’s move to lift interest rates could be diffused to consumers, but I would contemplate the market would absorb the 25 basis point (bps) hike which happened after an interval of almost a year, without causing significant impairment.

The US dollar has been strengthening across foreign exchange markets on recovered confidence in the US economy, and this forte will be supportable over the entire interest-raising cycle. The main recipients in terms of purchasing power will be countries with dollar-pegged currencies such as the dirham, but others have to bear the impact of seeing their currencies devalue.

The interest rates are strongly influenced by movements in the global financial markets. The effect of the recent market swing following the US election in November and Brexit vote in late June, given the weakness of the euro and pound at lows, has created uncertainty in the financial markets.

In the UAE, another quarter point rate rise is well within the affordable range and the majority of lenders had already riveted to the recent upsurge with the appropriate adjustment in the borrowing cost with the Central Bank of the UAE. Moreover, in conjunction with the Emirates Inter Bank Offered Rate (Eibor) pricing, which has seen a steady increase in the benchmark rates, reflecting the market movement over the past few months, there has been a major coercion in the current product pricing. Conversely, in today’s circumstances, it’s important for existing mortgagors to be solicitous and vigilant about market movements.

Hence it is suggested, mortgage borrowers should do their research, think of longterm objectives and rummage for the best mortgage product to give value to their investment. If you are finding your interest rates are high compared to the current market, get it evaluated and start negotiating with your current lender for a rate reduction before exploring a new opportunity.

This helps to relinquish the refinancing cost, but if there is no yield then it’s not favourable to move to a new lender.

Moreover, if you are planning to live in your home for at least five more years, then look into different mortgage options, but if planning for short-term investment, I would advise a watch-and-see strategy.

Next question:

It’s the start of a new year and I want to get my finances in order. This means paying off my credit card debts and saving and investing more efficiently. At 30, I spend too heavily, save too little and invest nothing. What’s the best strategy to kick start my new financial outlook? BW, Dubai

Every three weeks The National features a reader’s personal finance problem. If you have an issue or want to suggest a solution for another reader’s concern, write to pf@thenational.ae