UAE Rate Hike: How Borrowing Costs Will Soar for Residents

The UAE Central Bank has raised its base rate by 25 basis points to 3.9%, mirroring the US Federal Reserve's increase of the same amount on Wednesday.

This move is necessary due to the dirham being pegged to the dollar, forcing the UAE to follow Washington's monetary policy decisions.

Residents with variable-rate mortgages or personal loans tied to the Emirates Interbank Offered Rate (Eibor) can expect their payments to rise when their rate is next reviewed. Dinesh Krishnamurthy, a Dubai resident who owns a two-bedroom apartment in Business Bay, worries that his fixed interest rate might change soon.

Landlords with financed properties may also be affected, as higher financing costs could put pressure on them to adjust rents. However, Jaafar Hachem, Managing Director of Zentara Solutions, believes the impact may not be immediate and landlords will likely look for ways to manage their margins through cost management.