CBUAE Base Rate
The Central Bank of the UAE (CBUAE) base rate stood at 4.90% as of December 2024, following the 75 basis point reduction that mirrored the US Federal Reserve’s easing cycle during the second half of the year. The UAE dirham’s peg to the US dollar at a fixed rate of AED 3.6725 per USD requires the CBUAE to closely track Federal Reserve monetary policy.
Base Rate History
| Date | CBUAE Base Rate (%) | Change (bps) | Fed Funds Rate (%) |
|---|---|---|---|
| March 2022 | 1.00 | +25 | 0.50 |
| December 2022 | 4.40 | +50 | 4.50 |
| July 2023 | 5.40 | +25 | 5.50 |
| January 2024 | 5.40 | 0 | 5.50 |
| September 2024 | 5.15 | -25 | 5.00 |
| November 2024 | 4.90 | -25 | 4.75 |
| December 2024 | 4.65 | -25 | 4.50 |
EIBOR Rates (End of 2024)
The Emirates Interbank Offered Rate (EIBOR) serves as the primary benchmark for corporate and retail lending in the UAE.
| Tenor | EIBOR Rate (%) | Change YTD (bps) |
|---|---|---|
| Overnight | 4.52 | -68 |
| 1 Week | 4.56 | -64 |
| 1 Month | 4.62 | -58 |
| 3 Months | 4.71 | -52 |
| 6 Months | 4.78 | -48 |
| 12 Months | 4.86 | -42 |
Mortgage Rates
| Mortgage Type | Rate Range (%) | Typical LTV (%) |
|---|---|---|
| Variable rate (3M EIBOR + spread) | 5.49 - 6.74 | 75-80 |
| Fixed rate (1 year) | 4.99 - 5.99 | 75-80 |
| Fixed rate (3 year) | 5.24 - 6.24 | 75-80 |
| Fixed rate (5 year) | 5.49 - 6.49 | 70-75 |
| Islamic finance (Ijara) | 5.29 - 6.49 | 75-80 |
Deposit Rates
| Deposit Type | Rate Range (%) |
|---|---|
| Savings account | 1.00 - 3.50 |
| 1-month term deposit | 3.80 - 4.40 |
| 3-month term deposit | 4.00 - 4.60 |
| 6-month term deposit | 4.10 - 4.70 |
| 12-month term deposit | 4.20 - 4.80 |
Monetary Policy Transmission
The currency peg constrains the CBUAE’s ability to set independent monetary policy. Interest rate decisions follow the Federal Reserve with a lag of typically zero to one business days. This means UAE monetary conditions are effectively determined by US inflation dynamics and Federal Reserve objectives rather than domestic economic conditions.
During the 2022-2023 tightening cycle, higher rates moderated credit growth and contributed to a cooling of speculative real estate activity. The 2024 easing phase has begun to support renewed credit demand, particularly in mortgage lending and SME finance.
Impact on Key Sectors
The real estate market is the most rate-sensitive sector in the UAE economy. Mortgage volumes declined approximately 12% during peak rates in early 2024 before recovering as rate cuts materialised. Corporate borrowing costs, typically priced at 3-month EIBOR plus a margin of 150-350 basis points, also declined, supporting business investment.
Outlook
Further rate reductions are expected through 2025 as the Federal Reserve continues its easing cycle. Market consensus anticipates the CBUAE base rate reaching approximately 3.75-4.00% by end-2025, which would provide meaningful stimulus to credit-sensitive sectors including real estate, construction, and consumer lending.