Lower interest rates are here to stay — 4 ways this will grow your money in UAE

Dubai: For the second time this year, both the US Federal Reserve and the Central Bank of the UAE (CBUAE) cut key interest rates by 25 basis points.

If you live in the UAE, this matters — even if you’re not following every move from Washington. Because the dirham is pegged to the US dollar, the CBUAE mirrors the Fed’s decisions.

That means cheaper borrowing, more spending, and potentially better mortgage rates. But this time, something’s different.

Fed Chair Jerome Powell signalled that another rate cut in December isn’t guaranteed — and that uncertainty is already rippling through global markets, oil prices, and Gulf economies. Here’s what has changed, and what UAE residents can expect in the months ahead.

1. Cheaper loans — but cuts aren't endless

If you already have a variable-rate mortgage or loan, you’re likely to see your monthly payments drop slightly in the coming weeks. UAE banks typically adjust their rates in line with the CBUAE base rate.

For new borrowers, the picture looks better too. Home loans, personal loans, and auto finance are becoming more affordable. But Powell’s comments suggest this easing cycle may pause soon.

“A further reduction in the policy rate at the December meeting is not a foregone conclusion – far from it,” Powell said.

That means the current window of lower borrowing costs could be short-lived. Analysts at Ebury expect one more Fed cut by December “unless new data says otherwise,” but the Fed’s internal disagreements — with one official voting for no change — make future moves less certain.

In the UAE, mortgage rates had already been drifting lower before the meeting, reaching their lowest level in over a year. Further drops are possible, but not guaranteed.

2. Consumer spending likely to increase

Lower borrowing costs and reduced loan payments usually free up household income — and that’s starting to show. Retail analysts in Dubai note that consumer confidence has been rising since mid-2025, supported by higher disposable income and steady job growth in hospitality, transport, and retail.

Economists expect the rate cut to further boost discretionary spending, especially on travel, electronics, and mid-range housing upgrades. UAE retailers and service sectors could see stronger year-end demand as households take advantage of easier financing and more favourable repayment terms.

However, spending growth may remain uneven, as some households still prioritise debt repayment or face tighter savings returns in a lower-rate environment.

With regard to the impact of interest rate cuts on savings rates, financial analysts are warning depositors to lock in current rates before banks fully reprice products downward. “Returns on savings accounts and deposits are only going to keep dropping,” says Matt Schulz of LendingTree. If you rely on passive income from deposits, now is the time to consider diversifying into equities, Sukuk, or real estate — sectors that tend to perform better in a lower-rate environment.

3. Credit cards: Slight relief, but not much

Carrying a credit card balance? Expect a modest cut in your APR (annual percentage rate) — but don’t expect miracles.

Most UAE credit cards are variable-rate products linked to local benchmarks. When the Fed and CBUAE cut rates, banks typically adjust credit card rates within a billing cycle or two. But even then, the savings are small.

For instance, a bare minimum interest rate cut on a Dh25,000 balance could save only around Dh20–25 over the course of repayment. As Bankrate’s Stephen Kates puts it: “A quarter-point rate cut is good, but it doesn’t really change a lot for people carrying a balance.”

The better move? Use this period of lower rates to pay down debt faster before rates stabilise or rise again.

4. Property and investment demand grows

In Dubai, where mortgage activity is a key market driver, rate cuts are already lifting buyer sentiment.

Developers report stronger inquiries and off-plan launches, while property analysts expect real estate transactions to rise modestly through early 2026 if rates stay near current levels.

Investors are also taking note. Equity markets across the Gulf edged higher after the Fed’s decision, helped by strong corporate earnings and optimism about trade between the US and China.

Lower rates typically push investors away from low-yielding deposits and toward stocks, bonds, and property — all of which can benefit from cheaper capital.

But Powell’s hawkish tone caused a brief sell-off in US Treasuries, sending the 10-year yield back above 4%. This volatility shows that markets are still unsure how far — or how fast — rates will fall from here.

Effects of Fed’s internal split

The latest meeting revealed deep divisions within the Fed — the first time in six years that members dissented in both directions. One wanted a larger cut; another wanted none.

This tug-of-war reflects an economy giving mixed signals: a cooling job market, sticky inflation, and a data blackout due to the US government shutdown.

For UAE residents, this means uncertainty is back. The pace of future rate cuts — and how much relief they bring to borrowers — now depends heavily on US data, which is limited for now.

As Roman Ziruk of Ebury noted, “unanimity is likely a thing of the past,” and the rate path “may not be as straightforward as previously thought.”

What UAE residents can do

Here’s what makes sense in this environment for residents based in the UAE:

• Homeowners: If you’re on a variable-rate mortgage, review your repayment schedule — you could save several hundred dirhams monthly.

• Prospective buyers: Act soon if you’re planning to buy; the next cut isn’t guaranteed.

• Savers: Lock in fixed deposits now before rates drop further.

• Investors: Expect short-term volatility, but lower rates could lift equities and property over the medium term.

Final thoughts..

While rate cuts often bring a sense of relief, this one comes with caution. Powell’s message was clear: the Fed is no longer on autopilot, and more cuts are far from certain.

For UAE residents, that means now is the time to take advantage of today’s lower borrowing costs — while they last.