Fixed vs variable mortgage rates in the UAE

There are two ways to purchase a property in Dubai: by paying cash or by getting a mortgage loan. Although cash investment may be more time-efficient, securing a mortgage for a property in Dubai gives you greater control over your finances. If you choose to buy a property with a mortgage, the mortgage rate is a term you wish to be entirely familiar with.

Mortgage rates are the interest rates charged on mortgages. You’ll be paying them alongside your principal payment until you have paid off the loan. It is important to know and to be able to plan how your interest rate (and thus your monthly installment) will change during the repayment period. A mortgage rate is largely determined by the market, with some influence from the nation’s largest banks.

There are two main types of mortgage rates in the UAE: fixed and variable. But, what does that mean and how are they different?

What is a fixed mortgage rate?

With a fixed mortgage rate, you pay the same interest rate for a specific period of time during the mortgage repayment period. Banks in Dubai and the UAE usually offer a fixed mortgage rate only for a period between 1 and 5 years. 

For example, the rate you could get for a five-year fixed mortgage is 3.45% if you bought a property for AED 1 million with AED 250,000 down payment (25% of the property price). With an AED 750,000 mortgage (75% of the property price), the first five years' payments would be AED 3735 per month. Following the five years, you will be switched over to a reversion rate (also called a follow-on rate).

What is a variable mortgage rate?

Variable mortgage rates remain variable throughout the repayment period, in contrast to fixed-rate mortgages. Therefore, this type of mortgage rate is based on the benchmark interest rate EIBOR (The Emirates Interbank Offered Rate) fluctuations.

You can see the EIBOR rates for Tuesday 20 December 2022 below, but these rates change on a daily basis so it’s best to consult the Central Bank of the UAE before proceeding with the mortgage application.
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What are the advantages and disadvantages?

There are many advantages and disadvantages to each type of mortgage rate. Listed below are the ones you should pay attention to:

In general, fixed mortgage rates are good for people who prefer shorter repayment terms and variable mortgage rates are suitable for those who prefer medium- and longer repayment periods. The fixed mortgage rate is also higher than variable rates for the same property because banks want to protect themselves from the increase in interest rates on the capital market.

UAE Banks - Mortgage rates

The dominant type of mortgage rate in the UAE is a combination of fixed and variable. You can check out the current mortgage rate types available from the major banks in the UAE below:

Next steps

If you need advice regarding mortgage options, mortgage rates, bank offers or anything else mortgage-related feel free to contact our dedicated mortgage advisers. 

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Also, check out our mortgage offers for:

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In case you still haven’t found your dream property, search through our portal or get in touch with our best property advisors for additional help and guidance.

Photo credits:

1. Towfiqu barbhuiya | Unsplash

2. EIBOR rates screenshot | Central Bank AE