Fixed or variable rate? Choosing a mortgage rate in the UAE

How fixed rates work

With a fixed rate, your interest rate and monthly payment stay the same for an agreed period, typically 1 to 5 years. That makes budgeting simple and protects you if rates rise. After the fixed period, the loan usually moves to the bank’s variable rate.

How variable rates work

Variable rates in the UAE are typically linked to EIBOR, the Emirates Interbank Offered Rate, plus a margin set by the bank. When EIBOR moves, your payment moves with it, usually at set review dates. Variable rates can start lower than fixed ones but carry more uncertainty.

What a rate change means in practice

On a AED 1,200,000 loan over 25 years, small differences in rate add up:

A one-point rise costs this borrower roughly AED 1,000 more every month. That’s worth weighing against the certainty of a fixed rate.

Which should you choose?

• Choose fixed if a predictable payment matters most, or if your budget has little room for increases.
• Consider variable if you can absorb higher payments and want flexibility to repay or switch.
• Look at what happens after the fixed period: the follow-on rate matters as much as the headline rate.

Switching later

You can move your mortgage to another bank when a better deal is available. UAE Central Bank rules cap the early settlement fee at 1% of the outstanding balance or AED 10,000, whichever is lower. Learn how a mortgage buyout works.