Understanding the Benchmark That Shapes Your Mortgage Rate – Ricadi Mortgages Insight Report
Buying a home in the UAE often begins with one confusing question:
“What exactly is EIBOR—and why does it control my mortgage rate?”
For many first-time buyers, EIBOR sounds technical, intimidating, and hidden behind financial jargon. But in reality, it is one of the simplest and most powerful factors that determines:
• Your mortgage interest rate
• How much your monthly payments change
• The total cost of your home loan
• When you should lock or float your mortgage rate
• Which bank offers the most competitive deal
This guide Ricadi Mortgages simplifies everything.
Whether you’re a salaried expat, a Golden Visa holder, a non-resident investor, or a UAE resident exploring your first mortgage—this is the ultimate reference you’ve been searching for.
1. What Is EIBOR? (In Simple Words)
EIBOR stands for Emirates Interbank Offered Rate.
It is the daily interest rate at which UAE banks lend to each other.
When banks borrow from one another, they use EIBOR as the base reference.
This becomes the foundation for almost every mortgage in the UAE.
Your mortgage rate = EIBOR + Bank Margin
For example:
If EIBOR = 3.20%
Bank Margin = 1.75%
Your rate = 4.95%
2. Who Decides EIBOR?
EIBOR is set the Central Bank of the UAE (CBUAE).
But the Central Bank does not “guess” the rate. It collects live data from large UAE banks known as Panel Banks.
These banks include major names like:
• Top local banks
• Leading international banks with UAE branches
Each morning, these banks submit the rate at which they would lend unsecured funds to other banks.
The Central Bank averages these values and publishes the official EIBOR rate.
It is transparent, regulated, and publicly available.
3. How EIBOR Is Calculated
The Central Bank uses a structured approach:
- Panel banks submit their rate quotes
- The highest and lowest rates are removed (to eliminate distortions)
- The remaining rates are averaged
- The official EIBOR is published daily
This process ensures:
• Accuracy
• Stability
• Removal of bias
• Reflection of real market conditions
4. Why Does EIBOR Change?
Because it reflects the economic heartbeat of the UAE.
EIBOR rises when:
• Inflation rises
• Demand for credit increases
• Global interest rates rise
• Liquidity tightens in the banking sector
• UAE interbank activity becomes more expensive
EIBOR decreases when:
• Economic stability improves
• Liquidity increases
• Central banks worldwide ease monetary policy
This is why mortgage rates sometimes feel unpredictable—they move with EIBOR.
5. What Are the Different Types of EIBOR?
The Central Bank publishes multiple tenor-based EIBOR rates:
• 1-month EIBOR
• 3-month EIBOR
• 6-month EIBOR
• 12-month EIBOR
Most UAE mortgages follow:
3-month EIBOR
or
6-month EIBOR
This means your mortgage rate will review and potentially adjust every 3 or 6 months.
6. Why Do UAE Mortgages Use EIBOR?
Because the UAE mortgage market is floating-rate based.
Banks want to ensure that when economic conditions change, your mortgage rate adjusts too.
EIBOR helps maintain:
• Fair pricing
• Transparency
• Predictability
• A uniform benchmark
• Consistency across banks
It keeps mortgage rates aligned with real market conditions.
7. Fixed Rate vs EIBOR-Linked Variable Rate: What’s Better?
Most UAE borrowers face this choice:
Fixed Rate Mortgage
• Stable monthly payments
• No surprises
• Best during rising EIBOR cycles
Variable Rate Mortgage (EIBOR + Margin)
• Follows EIBOR
• Can rise or fall
• Best during stable or falling cycles
Many buyers begin with a fixed rate for 2–5 years, then shift into EIBOR once the fixed term ends.
8. How EIBOR Affects Your Mortgage Payments
Scenario Example:
If EIBOR rises 0.50%…
Your mortgage rate rises 0.50%
Your monthly installment increases
Your total interest paid increases
If EIBOR falls 0.50%…
Your rate decreases
Your installment reduces
Your loan becomes cheaper
A simple 0.50% drop can save a borrower thousands of dirhams per year.
9. Should You Lock Your Rate or Stay on EIBOR? (2025 Insight)
Here’s a strategic summary for 2025 homebuyers:
Choose fixed rate if:
• EIBOR is expected to rise
• You want stability
• You’re planning to budget long-term
Choose EIBOR-linked if:
• Rates are stable or expected to fall
• You want lower initial payments
• You can tolerate fluctuations
Ricadi Mortgages helps buyers pick the most profitable strategy based on market signals.
10. EIBOR vs SOFR vs LIBOR – Why UAE Uses Its Own Benchmark
Global benchmarks like SOFR (US) replaced older indices like LIBOR.
The UAE uses EIBOR because:
• It reflects the local economy
• Aligns with UAE banking liquidity
• Follows regional risk structures
• Matches how UAE banks lend
It is custom-built for the UAE mortgage ecosystem.
11. Can You Negotiate the “Bank Margin” Above EIBOR?
Yes.
This is where Ricadi Mortgages becomes invaluable.
Banks rarely negotiate with walk-in customers, but brokers can negotiate the margin, which directly reduces your mortgage rate regardless of EIBOR movement.
Example:
Bank A Margin = 2.10%
Negotiated Margin = 1.75%
Savings over 25 years = tens of thousands of dirhams.
12. Will EIBOR Fall in 2025? (Expert Forecast Insight)
Without providing financial predictions, current global indicators suggest:
• Rate adjustments are expected
• Global economies are stabilizing
• Long-term downward pressure may emerge
• Fixed rates may soften gradually
For most buyers, 2025 is a year for:
refinance opportunities + competitive EIBOR-linked options
Ricadi Mortgages tracks daily rate movements and alerts clients when it’s the right time to lock.
13. How Ricadi Mortgages Helps You Navigate EIBOR
Mortgage buyers often get overwhelmed :
• Rate movements
• Margin differences
• Bank-to-bank variations
• Documentation
• Eligibility criteria
Ricadi Mortgages simplifies everything offering:
• EIBOR-based rate comparisons
• Best bank margin negotiations
• Fixed vs variable strategy consulting
• Daily rate movement insights
• Personal eligibility analysis
• Long-term cost comparison
This transforms a stressful process into clarity and confidence.
14. Final Summary: Why Understanding EIBOR Matters
If you understand EIBOR, you can:
• Predict your mortgage costs
• Choose the right loan structure
• Lower your overall interest
• Time your rate lock effectively
• Protect your monthly budget
In short:
EIBOR is the pulse of the UAE mortgage market—and knowing how it works gives you a real financial advantage.
