Your mortgage may depend on what type you have
Mortgage holders may be among the first to feel the effect of higher rates, depending on the terms of their loan.
Residents with a fixed mortgage rate will generally continue paying the rate agreed with their bank during that fixed period.
The situation is different for mortgages with variable rates.
Those loans can change when the benchmark used to price them is reviewed. That means a homeowner with a variable-rate mortgage could eventually face a higher monthly payment if the rate on the loan rises.
The timing will depend on the mortgage contract and when the bank next reviews the rate.
Someone whose fixed mortgage period is approaching its end may also find that the rate available when the loan moves onto a new pricing structure is different from the one they have been paying.
The important point for homeowners is that Thursday’s increase does not mean every mortgage payment automatically rises overnight.
Taking a new loan could cost more
People planning to buy a home, finance a car or take a personal loan may also notice a change in the borrowing environment.
Higher central bank rates increase the cost of money across the financial system and can influence the rates banks charge customers taking out new credit.
Banks still decide how they price individual products, so a 25-basis-point increase in the UAE Base Rate does not translate into an identical increase on every new mortgage, car loan or personal loan.
Customers comparing loans may therefore see different rates and offers depending on the bank, loan amount, repayment period and their own financial profile.
Existing fixed-rate personal or car loans are different because the cost is already set under the terms agreed with the lender.
Credit cards do not all change overnight
The Central Bank increasing its Base Rate does not automatically mean every cardholder will see their credit card rate rise by 25 basis points on Thursday.
Card rates and charges are set according to the terms of each product.
The broader effect of higher interest rates is that borrowing becomes more expensive across the economy, particularly for customers seeking new credit or using products whose rates can change.
Savers may have something to gain
People keeping money in savings accounts or fixed deposits may find banks offering more attractive returns as interest rates move higher.
That benefit will depend on how individual banks price their savings products.
A bank may choose to increase deposit rates, keep them unchanged or offer higher returns only on certain terms or balances.
Residents with cash savings can therefore compare the rates available on deposits in the same way borrowers compare loan offers.
What residents should look at now
The latest move makes the terms of an existing loan more important than the headline Base Rate itself.
Mortgage holders can check whether their rate is fixed or variable, when it will next be reviewed and when any fixed period ends.
People considering a new mortgage, car loan or personal loan can compare offers across banks because borrowing costs will not move uniformly.
Savers can also watch deposit rates to see whether banks pass higher market rates through to customers.
Nivetha Dayanand is Assistant Business Editor at Gulf News, where she spends her days unpacking money, markets, aviation, and the big shifts shaping life in the Gulf. Before returning to Gulf News, she launched Finance Middle East, complete with a podcast and video series.
Her reporting has taken her from breaking spot news to long-form features and high-profile interviews. Nivetha has interviewed Prince Khaled bin Alwaleed Al Saud, Indian ministers Hardeep Singh Puri and N. Chandrababu Naidu, IMF’s Jihad Azour, and a long list of CEOs, regulators, and founders who are reshaping the region’s economy.
An Erasmus Mundus journalism alum, Nivetha has shared classrooms and newsrooms with journalists from more than 40 countries, which probably explains her weakness for data, context, and a good follow-up question.
When she is away from her keyboard (AFK), you are most likely to find her at the gym with an Eminem playlist, bingeing One Piece, or exploring games on her PS5.