UAE Residents and Expatriates Anticipate Decrease in Monthly Mortgage Payments and Credit Card Costs; Reassurance for Expatriates?

In a promising turn of events for residents and expatriates in the UAE, both loan repayments and credit card interest rates are expected to see a decline. The anticipated reduction is pegged to a decrease of 100 basis points in interest rates. Consequently, by 2024, borrowers in the UAE could experience a reduction in their monthly mortgage payments and credit card bills.

The current economic landscape, marked by the UAE and the US Federal Reserve, is causing a ripple effect in the valuation of individual debts such as mortgages, car financing, and credit cards. Financial analysts foresee a drop in interest rates for these financial instruments in the coming year, contributing to a relief in the financial burden on consumers.

The recent alignment of the UAE dirham with the US dollar plays a significant role in this development. Essentially, the Central Bank of the UAE (CBUAE) mirrors the Federal Reserve’s stance on monetary policy. As a result, it is expected that when the Federal Reserve lowers interest rates next year, the CBUAE will follow suit.

During the latest meeting, interest rates remained at an all-time high of 5.50%, a level sustained for the past 22 years. Similarly, the UAE Central Bank, in line with the Federal Reserve’s decision, is expected to maintain stability by keeping the base rate for the overnight deposit facility at 5.40% without any anticipated changes.

The UAE’s decision to align its monetary policies with the US Federal Reserve is expected to impact various financial aspects, including short-term liquidity loans. The penalty rate for borrowing short-term liquidity loans from the CBUAE, which serves as the benchmark for all standing credit facilities, has remained unchanged at 50 basis points above the prevailing base rate.

In conclusion, the financial outlook for borrowers in the UAE appears promising, with expectations of reduced monthly payments on mortgages and credit cards. The synergy between the UAE and the US Federal Reserve suggests a positive trend in interest rates. As the Federal Reserve signals a potential decrease, the UAE Central Bank is poised to follow suit, providing a financial reprieve for both residents and expatriates.


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