UAE Banks Decouple from Fed Rate Moves in Mortgage Market Shift

The United Arab Emirates (UAE) banking sector is adopting a more nuanced approach to interest rate movements, with banks increasingly managing rates within their own margins rather than passing on every change to borrowers. This shift reflects the current low-interest-rate environment and gives banks more flexibility to compete on mortgage pricing.

Lomond, a mortgage service provider, noted that the recent Federal Reserve decision had little impact on the Dubai mortgage market. 'It has barely registered,' said Adriaan Rossouw, head of mortgages at Lomond. 'Mortgage rates have generally remained unchanged, and most of our buyers aren't tracking the Fed at all.'

The UAE's base rate remains tied to the US Federal Reserve due to the dirham's peg to the dollar. However, mortgage pricing is now driven more by local market forces than by every Fed decision. Cushman & Wakefield Core and Reidin data show that the share of mortgage transactions has decreased from 63% in H1 2022 to 52% in H1 2026.

According to Rossouw, three factors are currently shaping Dubai's mortgage market: new residents moving to the UAE for career opportunities, existing residents changing homes due to marriage or growing families, and buyers responding to more favourable pricing. These factors have a greater influence on mortgage demand than individual Fed decisions.