UAE Interest Rates Rise: Did Lower Rates Actually Make Borrowing Easier?

The UAE Central Bank recently raised its interest rates by 25 basis points, aligning with the US Federal Reserve's first rate increase since 2023. Although interest rates in the UAE previously fell with a 75-point base rate cut throughout 2025, suggesting cheaper borrowing, the Central Bank's first-quarter Credit Sentiment Survey reveals a more complicated reality. Overall lending appetite actually dropped to minus 3.2 percentage points, driven by lower bank risk tolerance, a softer economic outlook, and reduced borrower creditworthiness, especially for small and medium-sized enterprises.

“Cheaper and easier are two different things, and right now they're not moving in lockstep,” explained Carol Glynn, a UAE-based financial consultant who noted that SMEs and individuals continue to struggle with access to funds.

The clearest illustration of market conditions sits in mortgages. A local mortgage broker stated that fixed three-year rates start at 3.89 per cent, down slightly from 3.99 per cent a year ago, while representatives from major UAE banks place current ranges between 3.99 and 4.24 per cent on a Dh1 million loan. Manish Bhaggnari, chief executive and founder of The Finance Lab, noted that rates have remained relatively flat over the past year. However, home finance is currently the most accommodating product on the market, with streamlined bank processes benefiting salaried employees and reduced trading requirements for self-employed borrowers.

Beyond mortgages, personal loans and credit cards remain difficult to obtain due to strict assessment criteria for unsecured products. Mr Bhaggnari highlighted that employees in sectors impacted by regional hostilities—such as aviation, hospitality, real estate, travel, oil and gas, and construction—face even stricter lending barriers. Carol Glynn emphasized a distinct divide, where salaried employees at recognized firms secure the best terms, while the self-employed, newer residents, and women navigating complex paperwork face significant hurdles.

For SME owners, funding remains conditional, time-consuming, and dependent on heavy documentation and personal guarantees. As the UAE borrowing market navigates mid-2026, the overall bar for approvals remains high, with heightened scrutiny on affordability, income stability, and existing debt.