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.

How EIBOR Rates Impact Your Mortgage?

Most banks in the UAE offer mortgage rates that are linked to the EIBOR, some linked to the 1month Eibor, most to the 3month Eibor, some to 6month Eibor and few to the 1year Eibor . Most banks also offer lower rates 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: 3.99%p.a. fixed for a period of 3 years

Follow on rate: 1.75%p.a(margin) + 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 3.99% comes to an end, your monthly payments will 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 5.2%), from the 4th year your mortgage rate could be around 6.5%p.a if EIBOR remains the same but with the US Fed rates scheduled to start to drop, its likely the Eibor would start its trajectory downward and most people who opt for a 3 year mortgage with margins below 2% would be in a favorable mortgage rate in between 3.5%p.a to 4.5%p.a. Choosing a rate fixed for a longer term than 3 years would not be something we would recommend today-March 2024.

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.