Fixed rates give certainty while variable rates track EIBOR. Learn how each works in the UAE, what happens after a fixed period ends and how to choose.
Key takeaways
- Variable rates in the UAE are usually linked to EIBOR plus a bank margin.
- Fixed rates are typically fixed for 1 to 5 years, then become variable.
- Compare the follow on rate, not only the introductory rate.
- Early settlement fees are capped by UAE Central Bank rules.
How mortgage rates work in the UAE
Most UAE home loans are priced in one of two ways. A fixed rate stays the same for an agreed introductory period. A variable rate moves with the Emirates Interbank Offered Rate (EIBOR), plus a fixed margin set by the bank. After any fixed period ends, almost every mortgage in the UAE reverts to a variable rate for the rest of the term.
Fixed rate mortgages
With a fixed rate, your monthly repayment is predictable for the fixed period, which is usually between one and five years.
- Pros: budgeting certainty and protection if rates rise.
- Cons: fixed rates are often priced slightly higher, and you may pay an early settlement fee if you sell or switch during the fixed period.
Variable rate mortgages
A variable rate is usually expressed as EIBOR (commonly the 3 month or 6 month rate) plus a margin, for example EIBOR plus 1.5 percent. Many banks also set a minimum floor rate.
- Pros: you benefit immediately if EIBOR falls, and the starting rate can be lower.
- Cons: repayments can rise if EIBOR increases.
Look beyond the headline rate
The most common mistake buyers make is choosing the lowest introductory rate without checking what happens next. Two offers with the same fixed rate can have very different margins afterwards. Over a 25 year loan, the follow on margin usually has a bigger impact on total cost than the first two years.
| Check | Why it matters |
|---|---|
| Follow on margin over EIBOR | Determines your rate for most of the term |
| Floor rate | Limits how low your rate can fall |
| Early settlement fee | Cost of selling or switching early |
| Processing fee | Usually up to 1 percent of the loan |
Which should you choose?
A fixed rate suits buyers who value certainty, have a tight monthly budget or expect rates to rise. A variable rate suits buyers who can absorb some movement in repayments and want flexibility. Many clients choose a short fixed period and plan to review their mortgage when it ends, when a buyout to another bank may offer a better deal.
Compare fixed and variable offers side by side
We will show you the real cost of each option across the full term, not just the first year.
Frequently asked questions
What is EIBOR?
EIBOR is the Emirates Interbank Offered Rate, the benchmark rate at which UAE banks lend to each other. Variable mortgage rates are usually set as EIBOR plus a margin.
Can I switch from variable to fixed later?
Often yes, either with your current bank or by moving your mortgage to another lender through a buyout.
Are fixed rates really fixed for 25 years in the UAE?
Rarely. Most fixed periods last between one and five years, after which the loan becomes variable.