What is EIBOR and how does it affect my mortgage?

Where EIBOR comes from

EIBOR is calculated daily from rates contributed by a panel of UAE banks and published by the UAE Central Bank. It reflects the cost of short-term borrowing between banks and serves as the reference rate for most variable-rate lending products in the country, including mortgages. Different tenors of EIBOR exist (such as one-month or three-month), and your mortgage contract specifies which one applies to you.

How it flows through to your mortgage

Your variable mortgage rate is typically structured as EIBOR + margin. The margin is fixed for the life of the loan (or a set period), but EIBOR itself changes, so your total rate — and your payment — changes with it. Because the AED is pegged to the USD, EIBOR tends to move in the same direction as US interest rates, with a short lag.

What this means for borrowers

• Rising EIBOR increases variable mortgage payments; falling EIBOR reduces them
• Fixed-rate borrowers are shielded from EIBOR moves until their fixed period ends
• Revert rates after a fixed period are usually EIBOR plus a margin
• The margin itself doesn't change once agreed, only the EIBOR component does

Worked illustration of an EIBOR move

How to manage EIBOR exposure

If you're on a variable rate and uncomfortable with future movements, you can generally refinance into a fixed period at any time, subject to the usual early settlement penalty on your current loan (capped at 1% of the balance or AED 10,000, whichever is lower). Use a mortgage calculator to stress-test your budget against a higher EIBOR scenario before deciding.

Learn more

For a deeper dive, read our full guide to EIBOR rates explained.