Impact of Interest Rate Increase in the UAE on Loan Installments and Deposit Interest

Interest Rate Increase in the UAE; What Effect Does It Have on Your Loan Installments and Deposit Interest?
If you live in the UAE, an increase in interest rates can affect two aspects of your income and expenses: the money you pay for loans and the interest you earn from bank deposits.

The Central Bank of the UAE, following the decision of the US Federal Reserve, has raised the base interest rate from 3.65% to 3.90%. Since the value of the dirham is pegged to the dollar, the UAE usually follows the US in interest rate decisions.

So why is this news important for us residents of the UAE?

If you have a variable-rate mortgage here, your monthly installment may increase when the rate is reviewed. If you intend to buy a house with a loan or take out financing for your business, the cost of securing funds may rise. However, the installments of loans that are still in the fixed-rate period will not change solely due to this decision.

On the other hand, if you have deposits in UAE banks, you may see new offers with higher interest; however, the increase in interest for all accounts is not automatic.

Therefore, the impact of this news is not the same for everyone: for some borrowers, the likelihood of higher costs; for some depositors, the opportunity for higher returns.