UAE interest rates rise: Experts weigh in on mortgages, loans and savings

Vijay Valecha, Thur, Sept 17, 2026 Gulf Business

The Central Bank of the UAE’s (CBUAE) latest interest rate increase is set to push up borrowing costs for some homeowners and businesses, while potentially delivering better returns for savers, according to UAE-based financial experts.

The CBUAE raised its Base Rate by 25 basis points from 3.65 per cent to 3.9 per cent, effective September 17, following a similar increase by the US Federal Reserve.

The Fed raised its target range by 25 basis points to 3.75-4 per cent on Wednesday, its first increase since 2023. The UAE’s monetary policy closely tracks US rates because of the dirham’s peg to the dollar.

For UAE consumers and companies, the impact could increasingly be felt through mortgages and business loans, particularly borrowing linked to the Emirates Interbank Offered Rate (EIBOR).

Vijay Valecha, chief investment officer at Century Financial, said the CBUAE’s Base Rate influences overnight funding costs, meaning EIBOR is also expected to move higher.

“In terms of impact, mortgages will definitely feel it. Most UAE home loans have a fixed rate for 1-5 years before switching to EIBOR plus a bank margin. Borrowers already on variable rates will see their monthly payments increase when their loans reset,” Valecha said.

The impact will not, however, be uniform across mortgage holders.

Valecha said borrowers coming off fixed-rate deals agreed in 2020 and 2021 could experience a larger increase because they may have locked in significantly lower rates. Those already paying fixed rates of around 5.5 per cent or higher could see little or no immediate change.

New mortgage customers could also face higher borrowing costs.

“New home-loan applicants are also likely to face higher rates, with offers moving above the mid-3 per cent levels seen through much of 2026,” Valecha said.

The impact is also expected to extend to UAE businesses, particularly small and medium-sized enterprises (SMEs) with floating-rate debt.

“Companies and SMEs with EIBOR-linked loans will pay more interest, adding pressure to margins, particularly in sectors already dealing with higher energy and shipping costs,” Valecha said.

Existing personal and auto loan borrowers could be less exposed to the latest increase because these products are generally offered at fixed rates for the duration of the loan, according to Valecha.

Credit card rates are also unlikely to change significantly because they are already considerably higher than money-market rates.

Savers, meanwhile, could emerge as beneficiaries if banks respond to higher benchmark rates by increasing deposit rates.

“There is a benefit for savers. Deposit rates, which declined during the previous easing cycle, could now move higher. UAE banks may also see some improvement in lending margins as interest rates rise,” Valecha said.

Gulf Business