UAE residents are set to benefit from gradually lower borrowing costs, following the Central Bank of the UAE’s decision to cut its Base Rate by 25 basis points, from 3.90% to 3.65%. The move came after the US Federal Reserve reduced its own rate, which directly affects the UAE because the dirham is pegged to the US dollar. After two years of rising costs, this shift marks the beginning of a gentler borrowing environment for households and businesses.
Since 2024, the US Federal Reserve has been lowering rates in small steps. While the pace has slowed, each cut still filters into the UAE market over time. Mortgage rates in the UAE currently range from 3.49% to 4.75% and are expected to ease slightly further in 2026. The Central Bank has also kept short-term liquidity borrowing at 50 basis points above the base rate, signalling a cautious but supportive stance.
Homeowners with variable-rate mortgages will notice the earliest impact. Banks adjust these rates gradually, so monthly payments may fall modestly in the coming months. Even small reductions help households manage rising living costs. Fixed-rate borrowers may not see immediate changes, but the overall trend is turning downward. For those planning to buy property in 2026, slightly lower repayments could improve affordability.
Personal loans may become marginally cheaper, helping residents manage school fees, home improvements or debt consolidation. Credit card rates, however, are likely to remain high, as these products react the slowest to rate cuts. Small businesses may also benefit from slightly more affordable lending as banks adjust over time.
Even small reductions in borrowing costs can boost confidence. Following the Fed’s announcement, UAE stock markets strengthened, especially in the banking and real estate sectors. Lower financing costs can also support the property market by encouraging more buyers and investors. Residents should note that savings and deposit rates tend to fall faster than loan rates. Borrowing will ease, but not immediately, and at a slower pace than the drop in savings returns.
Overall, borrowing costs in the UAE are expected to ease steadily but slowly. The reductions won’t be dramatic, but they will make financial conditions slightly more manageable after two years of tight lending conditions. The direction is positive, offering more stability and modest relief through 2026.
