UAE’s Loan and Credit Card Interest Rates to Go Down

UAE residents might witness a drop in borrowing costs as interest rates expected to down by 100 bps. According to analysts, there’s an expected decline in interest rates for personal loans, mortgages, car financing, and credit cards.

Furthermore, the experts looks like both the US Federal Reserve and our local Central Bank of the UAE (CBUAE) are teaming up to tweak interest rates in the upcoming year. Since our currency and the US dollar are practically joined at the hip, whatever the Fed decides tends to influence our CBUAE.

The Federal Reserve has also decided to maintain interest rates at a range between 5.25% and 5.50%. That’s been the norm for the past 22 years, which means they are keeping things steady for now. In tandem, the CBUAE mirrored this decision by maintaining the Base Rate at 5.40%. Moreover, the interest rate for short-term borrowing remains tethered to 50 basis points above the Base Rate for all extant credit facilities.

Following the undulating trajectory of interest rates during the pandemic era, characterized by fluctuations in both the UAE and the US to curb inflationary pressures, analysts are now contemplating the prospect of a 50-100 basis points rate reduction in 2024. Steven Rees, representing JP Morgan Private Bank, exudes optimism, hinting at the likelihood of a comprehensive 75 basis points reduction by US policymakers.

Rania Gule, affiliated with XS.com, employs a forward-looking approach, forecasting a sustained period of subdued interest rates by the Fed until mid-2024. Subsequently, she envisions a potential 50-100 basis points rate cut, anchored in sophisticated core inflation metrics.

Vijay Valecha, a prominent figure at Century Financial, elucidates the ramifications of a central bank’s decision to lower interest rates. The prevailing sentiment is one of favorability for the general populace, with the prospect of reduced rates for personal loans, mortgages, and credit cards. However, Valecha introduces a nuance—the impact may be more immediate on short-term loans compared to their long-term counterparts.

In the realm of mortgages, the cascading effect of lower rates manifests in diminished monthly payments, augmented purchasing power, and opportune moments for refinancing. As 2024 unfolds, it appears that our financial landscapes may experience a reprieve, signaling potential relief for our wallets in the coming year.