UAE Mortgage Costs Set to Rise as Higher Rates Reshape Property Decisions

Mortgage costs across the UAE are expected to increase after the US Federal Reserve raised interest rates by 25 basis points, prompting the UAE Central Bank to follow with a matching increase.

Because the dirham is pegged to the US dollar, changes in US monetary policy often flow through to borrowing conditions in the UAE. Variable-rate mortgages linked to EIBOR are likely to feel the impact most directly, while borrowers on fixed rates should remain protected until their fixed period ends.

For new buyers, higher financing costs may reduce borrowing capacity and increase monthly repayments. Securing pre-approval and comparing the full cost of different mortgage products will now be even more important before entering the market.

Existing borrowers approaching the end of a fixed-rate period may also face a higher repayment level when their loan resets. Reviewing refinancing options early could provide more time to compare rates and avoid making a rushed decision.

From an investment perspective the increase places greater pressure on cash flow. Rental income, service charges and financing costs will need to be assessed together when calculating the real return of a property.

The rise is unlikely to affect every part of the market equally. Cash-led purchases, lower-leverage investors and prime property segments may remain more resilient, while highly financed buyers could become more selective.

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Originally posted on LinkedIn