Key takeaways
- Variable UAE mortgage rates are usually priced as EIBOR plus a fixed bank margin.
- Fixed rates give certainty for 1–5 years, then typically revert to a variable "follow-on" rate.
- On an AED 1.6m, 25-year loan, each 1% rise adds roughly AED 880–960 a month.
- The early-settlement fee is capped at 1% of the balance or AED 10,000, whichever is lower.
On this page
Choosing between a fixed and a variable rate is one of the biggest decisions in any mortgage — and in the UAE it is closely tied to one benchmark: EIBOR. Understanding how it works makes it much easier to compare offers and to know what your payments could do in future.
What is EIBOR?
EIBOR (Emirates Interbank Offered Rate) is the rate at which UAE banks lend to each other, published daily under the oversight of the UAE Central Bank for several periods — commonly one month, three months and six months. Because the UAE dirham is pegged to the US dollar, EIBOR tends to move in the same direction as US interest rates.
Variable mortgage rates are typically quoted as EIBOR plus a margin — for example, "3-month EIBOR + 1.50%". The margin is fixed for the life of the product; the EIBOR part is reset periodically, so your payment can go up or down.
How fixed-rate mortgages work
With a fixed rate, the rate stays the same for an agreed period — commonly 1, 2, 3 or 5 years. Your monthly payment is predictable during that time, whatever happens to EIBOR. When the fixed period ends, the loan usually moves to a follow-on (reversion) rate, typically EIBOR plus a margin set out in your offer letter.
How variable-rate mortgages work
A variable (or floating) rate follows EIBOR. When rates fall, your payment falls; when they rise, so does your payment. Some variable products include a minimum rate (floor), which stops the rate falling below a set level even if EIBOR does — check for this in the terms.
What a rate change really costs
Here is the effect of different rates on the same loan: AED 1,600,000 over 25 years (for example, an AED 2,000,000 home with a 20% deposit). Payments are for a standard repayment mortgage.
| Interest rate | Monthly payment (AED) | Total interest over 25 years (AED) |
|---|---|---|
| 3.49% | 8,001 | 800,420 |
| 3.99% | 8,437 | 930,967 |
| 4.49% | 8,884 | 1,065,272 |
| 4.99% | 9,344 | 1,203,236 |
| 5.49% | 9,816 | 1,344,754 |
| 5.99% | 10,299 | 1,489,713 |
Each one-point rise adds roughly AED 880–960 a month and around AED 265,000–290,000 in interest over the full term. That is why a stress test matters: before you choose variable, check you could still afford the payment if rates rose by one or two points. The Rate sensitivity tab in our calculator does this for your own figures.
Which should you choose?
A fixed rate may suit you if…
- You want certainty while your budget is tight, for example in the first years after buying.
- You expect rates to rise, or simply prefer not to take the risk.
- You are unlikely to sell or refinance during the fixed period.
A variable rate may suit you if…
- You have room in your budget to absorb higher payments.
- You expect rates to fall, or want flexibility to overpay or settle early.
- You plan to sell or refinance in the near future.
Overpaying, settling early and switching
UAE Central Bank rules cap the early-settlement fee at 1% of the outstanding balance or AED 10,000, whichever is lower. Many lenders also allow partial prepayments each year, sometimes without a fee up to a limit. The end of a fixed period is often the best moment to review — see our refinancing service.
We do not publish live rates because they change frequently and depend on your profile. An adviser can compare current fixed and variable offers across lenders for your situation — ask us here.
Sources
- Central Bank of the UAE, EIBOR rates: EIBOR is the benchmark rate for lending between banks in the UAE, published for overnight, 1-week, 1-month, 3-month, 6-month and 1-year periods.
- Central Bank of the UAE Rulebook, Appendix No. (2): home-loan early and partial settlement is capped at 1% of the outstanding balance or AED 10,000, whichever is less.
- Checked against the sources above on 29 October 2026. Fixed-period lengths, bank margins and the rates in the comparison table are illustrative or typical of the market and are set by each lender; the table is calculated by Mortgage Hub.
Frequently asked questions
No. The base rate is the UAE Central Bank’s policy rate; EIBOR is the interbank lending rate. They usually move in the same direction.
Most use 1-month, 3-month or 6-month EIBOR. The period determines how often your rate is reset.
Often yes, either with your current bank or by refinancing to a new lender. Fees and eligibility apply.
This article is general information about mortgages in the UAE, correct to the best of our knowledge on 21 October 2026. It is not financial advice. Rates, fees and lending criteria change and are set by each lender and authority — confirm the details for your situation.
