Central Bank of the UAE Raises the Base Rate: How Will it Affect You?

UAE Base Rate Increase: What It Means for Borrowers

The Central Bank of the UAE (CBUAE) raised its Base Rate by 25 basis points, from 3.65% to 3.90%, effective 17 September 2026. This change may affect borrowing costs and financial decisions for UAE residents. However, the impact on your repayments depends on your loan terms and whether your interest rate is fixed or variable.

What Changed in the UAE Base Rate?

On 16 September 2026, the CBUAE announced a 25-basis-point increase in the Base Rate on its Overnight Deposit Facility (ODF), taking it from 3.65% to 3.90%, effective Thursday, 17 September 2026.

The decision followed the US Federal Reserve's move to raise its Interest Rate on Reserve Balances (IORB) by 25 basis points on the same day. The UAE Base Rate is anchored to the IORB. The CBUAE also maintained the rate for borrowing short-term liquidity from the Central Bank at 50 basis points above the Base Rate.

The Base Rate signals the general direction of monetary policy and provides a floor for overnight money market interest rates in the UAE. It can influence borrowing costs, but it does not automatically change every loan's interest rate.

How Does the UAE Base Rate Increase Affect Borrowers?

The effect of the Base Rate increase depends on your financial product and the terms of your agreement. If you have a variable-rate loan, check which benchmark your interest rate follows, the bank's margin and when your rate is reviewed.

Your Key Facts Statement and loan agreement can help you identify these details. For variable-rate loans linked to the Emirates Interbank Offered Rate (EIBOR), you can also check the CBUAE's published EIBOR rates.

What the Base Rate Change Means for Different Loans

Financial product	What you should check
Variable-rate home loan	Review the benchmark linked to your interest rate, the bank's margin and the frequency of rate resets. Check when the next adjustment may apply.
Fixed-rate home loan	Your repayments generally remain unchanged during the agreed fixed-rate period, subject to your loan terms. Check what rate may apply when the fixed period ends.
Personal loan	Review your loan agreement to confirm whether your interest rate is fixed or variable. If you are considering a new loan, compare current offers and the total borrowing cost.
Credit card	Check your card's Key Facts Statement for the applicable interest rate, fees and how interest is charged on outstanding balances.

Fixed or Variable Interest Rate: Which Should You Choose?

A fixed interest rate provides more predictable repayments during the agreed fixed-rate period. However, the rate and repayment terms that apply after that period ends may change.

A variable interest rate can change when its underlying benchmark is adjusted, in line with your loan agreement. This means your repayments or borrowing costs may rise or fall over time.

Before choosing between fixed and variable rates, consider your budget, repayment capacity, loan tenure and tolerance for changes in monthly payments. Compare the full loan terms rather than focusing only on the initial interest rate.

Refinancing Options for UAE Borrowers

If your current loan has become more expensive, refinancing may be worth considering. However, a lower advertised interest rate does not necessarily mean a lower overall cost.

Compare the proposed interest rate, processing fees, early settlement charges, repayment period and total amount payable. Check whether the new loan has a fixed or variable rate and how future rate changes could affect your repayments.

Businesses reviewing their borrowing arrangements should assess their cash flow, existing debt terms and exposure to interest rate changes before refinancing. The choice between fixed and variable borrowing depends on the business's circumstances and the terms available.

If you carry a credit card balance, review the interest charged on the outstanding amount and consider a repayment plan that fits your budget. A personal loan should only be considered as an alternative after comparing its total cost, fees and repayment terms with those of your existing debt.

What Should UAE Residents Do Next?

The CBUAE's Base Rate increase does not affect every borrower in the same way. Your loan agreement, interest rate structure and the benchmark used by your bank determine how the change may affect you.

To understand your options:

• Review your loan agreement and Key Facts Statement to identify your interest rate type and any applicable reset dates.

• Check the latest home loan interest rates in the UAE if you are comparing mortgage options.

• Learn about fixed and variable interest rates before deciding which structure suits your budget.

• If you need a new loan, compare personal loan options or mortgage options and review the full terms before applying.

Staying informed about interest rate changes can help you plan repayments, compare borrowing options and make decisions that suit your financial circumstances.