UAE: Loans, Mortgages Set To Become Cheaper Soon Amid US Rate Cut Forecast

Borrowing costs in the UAE are expected to decline in September as US interest rates are forecast to decrease .

Since the UAE dirham is pegged to the US dollar, the country closely follows US monetary decisions and adjusts rates in line with the US Federal Reserve policy.

The next Federal Reserve interest rate meeting and decision is due on September 17, 2025.

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On July 30, the Central Bank of the UAE (CBUAE) decided to keep the Base Rate applicable to the Overnight Deposit Facility unchanged at 4.4 per cent. It also maintained the interest rate on borrowing short-term liquidity at 50 basis points above the Base Rate for all standing credit facilities.

Analysts anticipate that the US Federal Reserve will begin cutting interest rates in September 2025, with further reductions likely in 2026.

Edward Bell, acting group head of research and chief economist at Emirates NBD Research, said the Fed's September decision could see a split vote among policymakers.“Two already voted for a cut at the July meeting, while other Fed officials have spoken out more cautiously about moving too quickly on easing rates when inflation risks remain salient.”

Bell noted that upcoming changes to the Fed's board could influence the direction of rate policy.“The composition of the Fed board of governors will be changing in the coming weeks following the resignation of Governor Adriana Kugler earlier in August. Stephen Miran, who currently chairs the Council of Economic Advisers, has been tapped by US President Donald Trump as Kugler's replacement until at least her original term ends in late January 2026. His appointment could come as early as the first week of September, giving him time to vote at the next Fed meeting,” said Bell.

“We now expect that the Fed will cut rates by 25bps at the September meeting, taking the Fed Funds rate to 4.25 per cent, and that they will also cut at one additional meeting this year. For 2026, we expect 100bps of easing, which will take the Fed Funds rate to 3.00 per cent by the end of the year,” he added.

For Gulf economies, Bell believes such rate cuts will act as a tailwind for growth.“The economies of the UAE and Saudi Arabia, in particular, have shown robust non-oil growth even amid high rates, and a lower rate profile will help to support growth,” he said.

Christopher Waller, a governor of the Federal Reserve, also expressed support for rate cuts. He confirmed his intention to begin lowering rates in September and indicated that further reductions could follow. He backed a 25-basis-point cut during the Fed meeting scheduled for September 16-17.

US president Donald Trump has also been advocating for rate cuts, arguing that they would stimulate the housing market.

Fadi Al Kurdi, founder and CEO of FFA Kings, added that Trump's efforts to replace Fed governors could also accelerate interest rate reductions.

Linh Tran, market analyst at xs, also anticipates a decline in interest rates, which is expected to benefit multiple sectors significantly.

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