UAE borrowers are set to get modest relief next year as global interest rates begin to edge lower. After two years of expensive borrowing, mortgage and loan costs in the UAE are expected to ease gradually through 2026, though economists warn the decline will be limited.
The shift comes as the US Federal Reserve, whose decisions directly influence UAE rates due to the dirham’s peg to the dollar, slows its pace of cuts. The Fed has already lowered rates several times since 2024 and now expects just one cut in 2025 and one in 2026.
Even small moves matter for UAE households. Variable-rate mortgages are likely to adjust first, with banks reducing monthly payments slowly over the year. Fixed-rate loans may take longer to respond, as global mortgage markets have barely reacted to recent Fed cuts.
Personal loan rates are also expected to soften slightly, while credit card rates are likely to remain high because lenders rarely pass on small reductions. Business financing may become marginally cheaper.
Financial markets initially rallied after the Fed announcement before turning volatile. The dollar weakened, a trend that often supports lower borrowing costs in dollar-linked economies such as the UAE.
Real estate activity could pick up as financing becomes a little more affordable, with brokers reporting improved sentiment following the Fed’s latest move.
Banks, however, are expected to adjust rates slowly. Analysts say UAE borrowing costs will fall, but only in small steps, and savings rates may decline faster than loan rates.
