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Fixed vs variable mortgage rates in the UAE

There are two ways to purchase a property in Dubai: by paying cash or by getting a mortgage loan. Although cash investment may be more time-efficient, securing a mortgage for a property in Dubai gives you greater control over your finances. If you choose to buy a property with a mortgage, the mortgage rate is a term you wish to be entirely familiar with.

Mortgage rates are the interest rates charged on mortgages. You’ll be paying them alongside your principal payment until you have paid off the loan. It is important to know and to be able to plan how your interest rate (and thus your monthly installment) will change during the repayment period. A mortgage rate is largely determined by the market, with some influence from the nation’s largest banks.

There are two main types of mortgage rates in the UAE: fixed and variable. But, what does that mean and how are they different?

What is a fixed mortgage rate?

With a fixed mortgage rate, you pay the same interest rate for a specific period of time during the mortgage repayment period. Banks in Dubai and the UAE usually offer a fixed mortgage rate only for a period between 1 and 5 years. 

For example, the rate you could get for a five-year fixed mortgage is 3.45% if you bought a property for AED 1 million with AED 250,000 down payment (25% of the property price). With an AED 750,000 mortgage (75% of the property price), the first five years' payments would be AED 3735 per month. Following the five years, you will be switched over to a reversion rate (also called a follow-on rate).

What is a variable mortgage rate?

Variable mortgage rates remain variable throughout the repayment period, in contrast to fixed-rate mortgages. Therefore, this type of mortgage rate is based on the benchmark interest rate EIBOR (The Emirates Interbank Offered Rate) fluctuations.

You can see the EIBOR rates for Tuesday 20 December 2022 below, but these rates change on a daily basis so it’s best to consult the Central Bank of the UAE before proceeding with the mortgage application.

EIBOR rates from the Central Bank in the UAE for December 20, 2022.

What are the advantages and disadvantages?

There are many advantages and disadvantages to each type of mortgage rate. Listed below are the ones you should pay attention to:




Fixed mortgage rate

  • Increase protection - You won't have to worry about your payments rising even if the bank's interest rates do go up.

  • Budget management friendly - you know exactly how much to pay each month without extra calculations and worries.

  • No decrease - You can’t gain from the rate decrease. If you have a fixed-rate mortgage you’ll still be obligated to pay the fixed amount, even if it’s higher.

  • The reversion rate can be higher - hence, the monthly payments are higher once the fixed period is over.

Variable mortgage rate

  • Rate can decrease - payments can decrease. You could end up paying less for your mortgage over its lifespan than you anticipated.

  • Avoiding high reversion rate - payments could decrease or increase slightly over a medium or long-term mortgage.

  • Rate can increase - No certainty that the mortgage rate and the payment won’t get significantly higher.

  • Not budget management friendly - you can’t know how much to set aside for the monthly payments.

In general, fixed mortgage rates are good for people who prefer shorter repayment terms and variable mortgage rates are suitable for those who prefer medium- and longer repayment periods. The fixed mortgage rate is also higher than variable rates for the same property because banks want to protect themselves from the increase in interest rates on the capital market.

UAE Banks - Mortgage rates

The dominant type of mortgage rate in the UAE is a combination of fixed and variable. You can check out the current mortgage rate types available from the major banks in the UAE below:

Next steps

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Photo credits:

  1. Towfiqu barbhuiya | Unsplash

  2. EIBOR rates screenshot | Central Bank AE