EIBOR is the Emirates Interbank Offered Rate, a benchmark interest rate used in the UAE for determining the cost of borrowing between banks. It is based on the average interbank deposit rates offered by a panel of UAE banks.
Most banks in the UAE offer mortgage rates that are tied to either the EIBOR or an internal benchmark rate. Some banks also offer lower prices for a limited time (say 1,2,3 or even 5years) post which the rates move to a variable rate that’s linked to the EIBOR.
To illustrate let us take an example of a typical mortgage offer in the UAE:
Rate Offered: 4.69%p.a. fixed for a period of 3 years
Follow on rate: 1.75%p.a + 3month EIBOR ( this is the rate from the 4th year)
So while the EIBOR today might not impact your mortgage rate or monthly payments, after your introductory rate of 4.69% comes to an end, your monthly payments could easily go higher or lower based on what the EIBOR is at that point of time. So considering the above offer and todays EIBOR (which is currently at circa 4.6%), from the 4th year your mortgage rate could be around 6.5%p.a if EIBOR remains the same.
We at mortgagemarket.ae have been following and keeping track of EIBOR trends in the UAE for over 10years and accordingly can share valuable insights on how the movement can affect your future payments. This enables us to guide you to the right mortgage offer that’s suited to your needs.