The Federal Reserve has delivered its third rate cut of 2025, lowering its benchmark by another 25 basis points and bringing the federal funds target range to 3.50%–3.75%. While this move was widely expected, its impact is already echoing far beyond the United States, including here in the UAE.
With inflation gradually easing in the US and credit conditions tightening earlier in the year, the Fed’s latest cut signals continued efforts to support economic stability. Markets now face a familiar question:
Will mortgage rates fall next or are we heading toward another period of uncertainty?
This is exactly where global policy meets everyday homeowners in Abu Dhabi and Dubai, especially those paying mortgages linked to EIBOR.
Let’s break down what this means for you.
Why the Fed Cut Rates Again in December 2025?
The December cut marks the Fed’s third consecutive reduction since September. Policymakers have been walking a tightrope as inflation is easing, but the job market is losing momentum.
• Unemployment has reached 4.3 % to 4.4%
• Job creation slowed to 119,000 new positions
By trimming short-term rates again, the Fed is signalling that credit conditions need support, while keeping its options open depending on incoming data.
For investors, lenders and global markets, this isn’t just a policy adjustment. It’s a shift in tone.
Do Mortgage Rates Automatically Fall When the Fed Cuts?
Not automatically, and this is where many people get confused.
US mortgage rates are influenced more by bond markets, inflation expectations, and investor sentiment than by the Fed rate alone.
A Fed cut usually creates the right environment for mortgage rates to ease but it does not guarantee a direct or immediate drop.
How Fed Cuts Influence EIBOR and UAE Mortgage Rates?
Even though the UAE mortgage market is different from the US, the connection is real.
Because the UAE dirham is pegged to the US dollar, changes in US rates eventually influence liquidity in the UAE banking system and that impacts EIBOR (Emirates Interbank Offered Rate).
When the Fed cuts rates and global liquidity improves:
EIBOR often softens in the following weeks or months.
Not instantly. Not one-to-one.
But the direction is usually the same.
What could happen next in the UAE?
If EIBOR drops further:
• Lower monthly instalments for variable-rate borrowers
• Strong refinancing opportunities
• Better buyout offers
• More aggressive mortgage pricing from banks
If EIBOR stabilises or rises:
• Lending becomes slightly tighter
• New mortgage rates may flatten
• Refinancing windows shrink
For now, the trend is leaning toward gradual EIBOR easing, which is excellent news for UAE homeowners.
And Here’s What It Means in Real Money
To make this completely clear, here is a real example from typical UAE mortgage profiles:
AED 2,000,000 mortgage
• 0.25% drop in EIBOR = approx. AED 5,000 saved per year
• 0.50% drop in EIBOR = AED 10,000+ saved per year
These are simple, measurable savings — and they multiply over a 20–25-year mortgage.
This is why even a small EIBOR movement matters.
What This Means for Homebuyers in Abu Dhabi and Dubai
1. Buyers taking new mortgages
Lower EIBOR creates a more competitive lending environment. Banks begin reducing margins and offering stronger incentives.
2. Homeowners on variable-rate mortgages
Your installments will fall the moment your EIBOR reset date kicks in. Even a small drop adds up quickly, especially for mortgages above AED 1M.
3. Clients considering refinancing or buyout
This is one of the best times in recent years to review your mortgage.
With EIBOR softening, refinancing can:
• Reduce your monthly instalments
• Improve your overall loan cost
• Help you secure better margins or fixed-rate options
4. Investors focused on long-term rental yields
Lower borrowing costs directly improve ROI, supporting cash-flow-positive investments in Abu Dhabi and Dubai.
Expert Insight: Where Mortgage Rates Might Go From Here
As a Senior Mortgage Advisor at Prime Rate Hub, here’s what I see in the market:
Trend 1: Banks will fight harder for customers
Lower rates mean banks want to grow their mortgage portfolios before the next cycle.
Trend 2: Early movers will benefit the most
A 0.25% EIBOR shift can create thousands of dirhams in annual savings. Waiting too long can mean missing the ideal window.
Proactive mortgage planning is now essential, not optional.
What Should You Do Now?
If you’re buying:
Get pre-approved now. Banks are adjusting their rate sheets.
If you already have a mortgage:
Review your rate and margin, you may qualify for better terms.
If you’re unsure about refinancing:
We calculate your savings clearly and transparently.
Prime Rate Hub doesn’t just compare rates.
We support you from start to finish, pre-approval, valuation, mortgage setup, handover, and long-term management.
Ready to Act?
Whether you’re buying, refinancing, or planning ahead, understanding EIBOR puts you in control.
If you want a personalised assessment or want to see your actual savings based on current rate trends, our team is ready to help.Get a Free Consultation with Prime Rate Hub today!