I don't agree competely with all the above.
Dubai is not the only country where LONGTERM intrest rates have been rising recently, as you describe it. There is a little misconception about intrest rates. Remember there are 2 types of intrest rates: short and long term.
Short term intrest rates are set by the national banks (like the Federal Reserve). During the last quarter of 2008, the FEDs of most western nations have adjusted the basic (short term) intrest rate downward to 1 to 3 percent. The banks use this short term intrest rate as a stick to determine the short term lending rate.
The long term intrest rate (used in mortgages etc) is more influenced by supply and demand. It normally follows a similar patern as the short term intrest rate (mostly a bit higher) but NOT always. ie in most countries the ST rate has been dropping, while the LT rate has been rising!!!!
Basically it means that banks want a higher reward for the risk they are taking giving longterm loans.
In the Dubai case it means that banks believe there are now higher risks than before when they issue mortgages and they want an even higher risk premium than before...Either they think you might default on your loan (eg. lose your job) or they believe the underlying property is overvalued and they would lose money if they would have to sell it.
What makes it worse is that there is no real competition in Dubai. I would not be surprised if the banks sit together every now and discuss common strategies (called collusion and in the western world illegal, here in the ME ???).
I think the crash in properties prices is far from over. Till then the LT intrest rate will remain high. When it drops, it means the banks think that the worst is over...
But I do have to agree with you : The banks are NOT there to help you; they want to earn big big bucks ...
. So nothing has changed yet....