Facing a mortgage decision in 2025–26? This definitive, data-driven guide explains fixed vs variable mortgages in the UAE, how EIBOR and CBUAE policy moves affect your payments, timing for remortgaging, a worked calculator example, and a step--step decision framework so you can confidently fix, remortgage or switch lenders.
Executive summary
If your mortgage deal is ending or you’re buying now, decide combining three lenses: market signals (EIBOR & CBUAE), personal cashflow tolerance, and total cost (rates + fees + exit charges). Recent central-bank easing and active lender competition make preparation and comparison more valuable than ever. centralbank.ae+1
Why this is urgent in 2025–26
Two simultaneous dynamics are shaping mortgage decisions today: monetary plumbing and property momentum. The Central Bank of the UAE’s policy adjustments and the daily EIBOR benchmark determine the plumbing of mortgage pricing; where EIBOR moves, variable mortgage payments follow. The CBUAE lowered its base rate in 2025, shifting interbank rates and prompting product repricing across banks. centralbank.ae+1
At the same time, Dubai and other UAE markets have experienced strong residential value growth in recent years, but many analysts warn of mounting supply that could exert price pressure into 2026. That combination—changing borrowing costs plus changing property-cycle risk—makes whether to fix, remortgage, or switch lender an especially high-impact decision today. Knight Frank AE+1
The technical primer: CBUAE, EIBOR and how UAE mortgages are priced
- CBUAE (Central Bank of the UAE) sets policy that influences liquidity and the short-term overnight rates that underpin the banking system. Policy decisions ripple into EIBOR and lender margins. The bank’s recent moves (including a 25 bps cut) materially affected lending pricing in late 2025. centralbank.ae
- EIBOR (Emirates Interbank Offered Rate) is the UAE interbank benchmark (1-, 3-, 6-month series). Many UAE mortgage products are quoted as “3-month EIBOR + bank margin” or as a fixed rate for a defined term. Watching EIBOR’s direction helps forecast variable payment paths. Current EIBOR daily values are published CBUAE and major banks. centralbank.ae+1
- How lenders package loans: Some banks offer fixed rates for 1–5 years; others price loans as EIBOR + a fixed margin. Post-fixed-term, most mortgages either roll to a variable formula or offer a new fixed deal. Always read the bank’s Key Facts Statement (KFS). HSBC UAE+1
Practical point: If EIBOR is falling and likely to remain low, variable loans become more attractive; if EIBOR is volatile or rising, a fixed rate buys budgeting certainty. But certainty costs a premium and often includes breakage terms.
Fixed vs Variable: practical pros & cons for UAE borrowers
Fixed-rate (1–5 years typical)
Pros
- Predictable monthly payment for the fixed period — straightforward budgeting.
- Protection from sudden EIBOR spikes during the fixed window. HSBC UAE
Cons
- Usually priced slightly higher initially than the lowest variable headline offers.
- Early-exit or breakage fees may apply if you refinance before the fixed term ends.
Variable (EIBOR + margin)
Pros
- Can be cheaper if EIBOR is low or falls over time.
- Typically more flexible in some banks (easier prepayment, portability). HSBC UAE
Cons
- Monthly repayments move with the market — exposure if rates climb.
- Greater uncertainty requires a cash cushion and stress-testing.
Rule of thumb: Fix if you need payment certainty or fear being squeezed a rate uptick. Choose variable if you can tolerate movement, believe rates may fall, and have an emergency buffer.
The “remortgage surge” — who faces a decision now
Many mortgages written during pandemic-era low rates have fixed periods that expire in 2025–26. That creates a cohort approaching decision points: renew with the same lender, switch lenders, or alter product type. With lenders competing for these renewals, retention and acquisition offers (cashback, waived fees, lower margins) can be attractive—especially for borrowers with healthy credit profiles and conservative LTVs. At the same time, market reports caution that supply growth may exert price pressure in parts of the market, which should inform your horizon and risk appetite. Knight Frank AE+1
A worked example — the true monthly impact (digit--digit arithmetic)
Assumptions (illustrative):
Purchase price: AED 2,000,000
Loan = 80% LTV → principal = AED 1,600,000
Term = 25 years = 300 months
Monthly payment formula:M = P * (r*(1+r)^n) / ((1+r)^n - 1) where r = monthly rate, n = number of months.
Compare:
- Fixed option (3-year fixed) at 4.25% annual → monthly rate
r = 0.0425 / 12 = 0.003541666666666667. Monthly payment ≈ AED 8,667.81. - Variable option estimated as EIBOR 3.90% + margin 1.5% = 5.40% annual → monthly rate
r = 0.054 / 12 = 0.0045. Monthly payment ≈ AED 9,730.08.
Difference: AED 9,730.08 − AED 8,667.81 = AED 1,062.27 per month (≈ AED 12,747 per year). (Numbers illustrative; check live product rates and fees for your case.)
Why this matters: An extra AED 1,000+ per month materially affects disposable income and savings plans. Always run the real numbers with current bank quotes before deciding.
Step--step decision framework (actionable)
- Identify your decision window. If you are within 4 months of the end of a fixed term, treat this as an active project. Collect documents and begin comparisons.
- Run dual scenarios. Calculate (A) a chosen fixed period’s payments, and (B) a variable path with a stress case (+1.5% / +2% EIBOR). If the stress case still fits comfortably, variable remains an option.
- Compare total cost, not just headline rate. Always compare: headline rate, arrangement fees, valuation/legal fees, and early exit penalties. Lower headline rate can be expensive once fees are included.
- Shop and negotiate. Approach at least two lenders and a broker. Retention offers from your bank may be good—but not always the best. Brokers can surface exclusive deals and negotiate fee waivers.
- Document readiness. Clean salary slips, bank statements, employment letter, passport/residency, title docs and KYC reduce friction and enhance negotiating leverage. Start 6–8 weeks ahead.
- Confirm portability options. If your lender offers portability (move your loan when you sell), that may affect whether fixing long term makes sense.
- Decide based on horizon & plans. If selling within 2–3 years, a long fix is rarely optimal unless it’s priced attractively. If staying 5+ years, a longer fix could be a defensive move.
Special notes: expats and high-LTV borrowers
- Expats: some banks restrict maximum LTV or impose slightly higher margins; examine expat-specific product pages and confirm residency documentation requirements. HSBC UAE
- High LTV (90–95%): attractive for entry, but these loans are more sensitive to small rate changes. Build a contingency cash buffer and consider ways to lower LTV rapidly (e.g., partial deposit increases) to access better rates.
Market timing — can you time the “best” moment?
The short answer: no guarantee. If the CBUAE and EIBOR are on a steady downward path and lenders compete, short fixes or variable options can pay off. If EIBOR rises or shocks occur, those holding variable loans suffer. Given the CBUAE’s recent easing in 2025 and the current EIBOR levels, some borrowers can lean toward shorter fixes or variable products—provided they have buffers and clear exit plans. Always reassess with live EIBOR and product data before committing. centralbank.ae+1
Common borrower mistakes (and how to avoid them)
- Only looking at the headline rate. Always include fees and exit costs.
- Not stress-testing. Model +1.5% and +2% rate scenarios for at least 12 months.
- Underestimating LTV effects. A small additional deposit can unlock materially better pricing.
- Waiting until the last week. Start 6–8 weeks before the decision window.
- Skipping professional help when appropriate. A reputable mortgage broker can more than earn their fee via better net pricing for many borrowers.
Ricadi’s practical checklist (use this now)
- Locate your KFS, mortgage contract and fixed-term end date. Note any early exit charges.
- Compile documents: latest 3 months’ salary slips, 6 months’ bank statements, passport & residency, title docs.
- Ask Ricadi to run a “compare KFS” dossier across 3 lenders (we compare headline APR, all fees, and portability).
- If cashflow is tight: prioritise a 2–3 year fix to regain certainty while you reduce LTV.
- If you have a healthy buffer: consider a short fix or variable product while monitoring EIBOR.
- Negotiate fee waivers (valuation, admin) with lenders—many will concede to retain or win business.
FAQs
Q: Should I fix my mortgage now or wait?
A: It depends on your risk tolerance and horizon. Fixing buys certainty; variable buys potential savings if EIBOR falls. Stress-test both scenarios for +1.5% to check resilience. adcb.com
Q: How far in advance should I start shopping before my fixed term ends?
A: Start 6–8 weeks before the end date. That gives time for pre-approvals, valuation and negotiation.
Q: Do expats get different rates?
A: Some lenders have expat-specific conditions or lower maximum LTVs—compare expat product pages and confirm documentation needs. HSBC UAE
Closing — Ricadi’s promise and next steps
This decision is both financial and psychological: you are choosing how much certainty to buy. Ricadi Mortgages recommends a methodical, evidence-based approach—collect documents, run dual scenarios (fixed vs variable with stress case), shop widely, and use negotiation levers (fee waivers, portability). With markets and EIBOR moving in 2025, preparedness, not panic, produces the best outcomes. centralbank.ae+1
Sources (authoritative)
- Central Bank of the UAE — EIBOR & policy announcements. centralbank.ae+1
- EIBOR daily rates (ADCB bank listing). adcb.com
- Knight Frank — Dubai Residential Market Review Q3 2025 (market momentum & supply notes). Knight Frank AE+1
- Reuters / Fitch analysis on Dubai supply and price-risk. Reuters
- HSBC UAE product pages (fixed vs variable, EIBOR + margin examples). HSBC UAE+2HSBC UAE+2
