UAE consumers and business owners are preparing for an uptick in borrowing costs, as markets anticipate a 25-basis-point interest rate hike from the US Federal Reserve this Wednesday. Because the dirham is pegged to the US dollar, the Central Bank of the UAE is expected to mirror this move, likely pushing its Base Rate from 3.65% to 3.90%. While this shift is widely expected and largely priced into financial markets, it will eventually filter down to individuals and companies holding loans linked to the Emirates Interbank Offered Rate (EIBOR), such as variable-rate mortgages and SME financing.

The impact of this policy shift will be a double-edged sword: while borrowers will face increased monthly repayment burdens, savers are set to benefit from more attractive returns on deposits. Experts note that the effect on households won’t be immediate, as loan repayments typically adjust only during specific reset dates. However, the long-term concern for many is the "higher for longer" interest rate environment, which could persist into 2027. Consequently, while depositors can look forward to better yields on their savings, borrowers are being advised to carefully review their financial capacity to manage sustained, elevated borrowing costs in the coming years.