The decision follows the US Federal Reserve, which raised its rates on 16 September for the first time since 2023 and has already signalled a possible second increase before year end. The dirham is pegged to the dollar, so the UAE rate tracks the US rate almost automatically. In July both central banks held steady, and the bank pre-approvals, acquisition plans and facility budgets built over the summer rest on rates that no longer exist.
What happened
On Wednesday 16 September 2026 the Central Bank of the UAE (CBUAE) raised the base rate applied to its Overnight Deposit Facility by 25 basis points, a quarter of a percentage point, from 3.65% to 3.90%, with effect from Thursday 17 September. The rate at which banks borrow short-term liquidity from the Central Bank remains set at half a point above the base rate and therefore moves to 4.40%. The decision came a few hours after the US Federal Reserve raised its rate on reserve balances from 3.75% to 4.00%: the Fed's first increase since 2023, justified by inflation still above the 2% target and by energy prices pushed up by tensions in the Gulf. The UAE base rate is tied to the US rate because the dirham has a fixed exchange rate against the dollar: when the Fed moves, the CBUAE follows in the same direction, normally on the same day. In July both had held steady and the market expected a cut by year end; the Fed has instead signalled another possible increase, with its next meeting at the end of October.
What changes in practice
The base rate acts as a floor for the UAE interbank rates, known as EIBOR (Emirates Interbank Offered Rate), which are the benchmark to which most mortgages and corporate financing in the UAE are linked. A base-rate increase passes through to EIBOR and from there to repayments, but not immediately and not in the same way for everyone: it depends on when each contract resets its benchmark. Three types of contract are affected. The first is the variable-rate mortgage or loan: the instalment rises at the next reset provided for in the contract, which may be monthly, quarterly or annual, and anyone whose initial fixed-rate period ends in 2027 will find the switch to variable priced more expensively than six months ago. The second is the EIBOR-linked overdraft, credit line or corporate lease: finance costs in the 2026 accounts, already under way, go up. The third is the bank pre-approval for a property purchase: for the same income, a higher rate means the bank lends a smaller amount, and a pre-approval calculated in July is no longer today's figure. On the other side, term deposits can pay more: each bank decides whether and how much of the increase to pass on to customers, and anyone holding idle balances on a current account has, from today, one more argument for asking.
Who it applies to
Anyone who bought property in the UAE with a variable-rate mortgage or with an initial fixed rate that is coming to an end, particularly purchases financed between 2021 and 2023 when rates were lower. Companies with credit lines, overdrafts, leases or financing linked to EIBOR, whether on the mainland or in a free zone. Anyone with an open bank pre-approval or about to sign a purchase agreement subject to a mortgage still to be obtained. And any company or individual holding significant liquidity on a non-interest-bearing current account. Nothing changes for borrowers on a fixed rate for the full term and for those with no financing at all.
The exposure
A quarter of a point is not in itself a shock. The exposure lies in the direction: for months plans were built on the expectation of falling rates, and this decision says the opposite, with a second increase already flagged as possible. Anyone who signs a purchase agreement today on the strength of a July pre-approval may be offered a mortgage for less than the amount required, with the deposit at risk. Anyone whose fixed period is ending and who has not yet asked the bank what happens next will discover the new instalment once it is already in force. For companies the exposure is quieter: higher finance costs eroding the 2026 margin without anyone having budgeted for them.
What to do now
Take every mortgage, credit facility and lease agreement and look for two things: the benchmark it is linked to and the date of the next instalment reset. Those two pieces of information determine how much and when this increase reaches you. If you have a fixed-rate period ending within the next twelve months, ask the bank in writing for the terms on the switch to variable and compare them with a fixed-rate offer from another bank: in the UAE, transferring a mortgage between banks is routine. If you have an open pre-approval, have it recalculated before signing any purchase agreement. If you hold idle liquidity above AED 500,000 (roughly USD 136,000), ask your bank and at least one other for their term-deposit rates at three, six and twelve months: from today they have fewer reasons to say no.
Sources
- https://gulfnews.com/business/banking/uae-central-bank-raises-base-rate-to-39-after-us-fed-rate-hike-1.500677315
- https://www.thenationalnews.com/business/economy/2026/09/16/us-fed-raises-interest-rates-what-does-it-mean-for-the-uae/
- https://gulfnews.com/business/banking/uae-interest-rates-rise-to-39-what-it-means-for-mortgages-loans-and-savings-1.500677352
Published 17 September 2026 on the basis of public sources and official United Arab Emirates instruments. This is not legal or tax advice. Verify your position with a qualified professional before acting.