UAE Announces Loan, Credit Card Interest Rates Drop

UAE Set to Witness Lower Interest Rates in 2024

The UAE users will pay less to borrow money in 2024 as interest rates are expected to go down by 100 basis points. Analysts say interest rates charged on personal loans, mortgages, car financing and credit cards are set to decline next year as the US Federal Reserve and the Central Bank of the UAE (CBUAE) will cut rates amidst a drop in inflation in the world’s largest economy.

This decline is assigned to the anticipated rate cuts by the US Federal Reserve and the Central Bank of the UAE (CBUAE), responding to a drop in inflation in the US.

Global Factors Influencing UAE Rates:

Given the pegging of the UAE dirham to the US dollar, the CBUAE tends to align its monetary policy with the US Federal Reserve. As the Fed is poised to cut rates, the UAE is expected to follow suit. The recent decision by the Fed to maintain interest rates aligns with the CBUAE’s stance, keeping the base rate unchanged.

Rising Rates Post-Pandemic:

Interest rates have been on an upward trend in both the UAE and the US post-pandemic, aimed at curbing multi-decade-high inflation in the latter.

Analysts’ Projections:

Analysts suggest that US policymakers are considering a total of 75 basis points in rate cuts for 2024, signaling confidence in the economy’s ability to avoid a recession. Projections by market analysts indicate the possibility of a 50 to 100 basis point rate cut by mid-2024, influenced by core inflation readings.

Impact on UAE consumers:

Consumers in the UAE should anticipate a direct impact from lower interest rates. When the central bank lowers interest rates, borrowing costs for personal loans, mortgages, and credit cards often decrease. Even current borrowers whose interest rates are subject to change might save money by refinancing at a cheaper rate.

Differentiated Impact on Borrowing:

Any decrease in interest rates, whether they are tied to short-term or long-term loans, would have distinct consequences. Interest rate fluctuations over a shorter time frame have a greater impact on credit cards and auto loans due to their shorter payback periods. Due to their connection to the Emirates Interbank Offered Rate (Eibor), mortgage rates in the United Arab Emirates are subject to the Federal Reserve’s funds target rate. A decrease in mortgage rates would lead to cheaper monthly payments, more purchasing power, and improved refinancing choices.