Mortgage & Finance
Fixed vs Variable Rates
Choosing the right mortgage rate.
Updated: September 2026 5 min read
A fixed-rate mortgage in the UAE keeps the same rate for an agreed period, usually the first few years; a variable-rate mortgage follows EIBOR, the Emirates Interbank Offered Rate, plus the bank's margin, so payments rise and fall with it. Fixed gives certainty for a while; variable can be cheaper or dearer over time. Here is how each works and what to check before choosing.
What is EIBOR?
EIBOR is the benchmark rate for lending between banks in the UAE, in dirhams. The Central Bank of the UAE publishes it for terms from overnight to several months, including one, three and six months, and describes it as the reference rate for loans such as mortgages. A variable mortgage is usually priced as EIBOR for a set term plus a margin, and resets on a schedule in your contract.
How a fixed rate works
- The rate is fixed for a period agreed in the contract, commonly the first few years of the loan.
- After that, the loan usually moves to a variable rate based on EIBOR plus a margin, for the rest of the term.
- Leaving during the fixed period can cost the early settlement fee, and the mortgage regulations also allow the lender's actual cost of breaking the fixed rate. Read that clause before you sign.
How a variable rate works
- Your rate is EIBOR plus the bank's margin, and changes when EIBOR changes at each reset date.
- Some offers include a minimum (floor) rate, so your rate won't fall below it even if EIBOR does.
- The margin is fixed in the contract. The bank can't change your terms without your written consent.
Fixed or variable: how to choose
- Choose fixed if a rise in payments would stretch your budget and you want certainty for the first years.
- Choose variable if you can absorb higher payments and want to benefit if rates fall, or may sell or repay early.
- Compare the full cost, not the opening rate: the fixed period, the rate after it, fees and early settlement terms.
- Ask what EIBOR term and reset frequency the variable part uses, and whether there is a floor.
Why the bank tests you at a higher rate
Central Bank rules require banks to check affordability with the rate 2 to 4 percentage points above your actual rate, and, for introductory rates, above the rate that applies once the introductory period ends. Do the same yourself: if a payment at that higher rate would push your total debts above half your income, the loan is too tight.
Islamic home finance
Islamic home finance charges a profit rate instead of interest, and can also be fixed or linked to a benchmark such as EIBOR. It is subject to the same Central Bank mortgage regulations as conventional loans.
Learn more
We don't list rates because they change often and differ by bank; get written quotes from several lenders. For lending limits, costs and the process, see the UAE Mortgage Guide.
Frequently asked questions
What is EIBOR?
EIBOR, the Emirates Interbank Offered Rate, is the benchmark rate for lending between banks in the UAE, in dirhams. The Central Bank publishes it for terms including one, three and six months, and a variable mortgage is usually priced as EIBOR plus the bank's margin.
What happens when the fixed-rate period on a mortgage ends?
The loan usually moves to a variable rate based on EIBOR plus a margin for the rest of the term. When comparing offers, look at the rate after the fixed period as well as the opening rate.
Why do UAE banks test affordability at a higher interest rate?
Central Bank rules require banks to check affordability with the rate 2 to 4 percentage points above your actual rate, and for introductory rates, above the rate that applies once the introductory period ends. If a payment at that higher rate would push your total debts above half your income, the loan is too tight.
Is Islamic home finance fixed or variable?
It can be either. Islamic home finance charges a profit rate instead of interest, which can be fixed or linked to a benchmark such as EIBOR, and it is subject to the same Central Bank mortgage regulations as conventional loans.
Sources
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