Cheaper loans in the horizon as UAE lowers interest rates

Consumers in the UAE can look forward to further drops in their mortgages as the UAE Central Bank dropped its key rate last week.

On Thursday, the central bank lowered the base rate applicable to the overnight deposit facility (ODF) by 25 basis points from 4.90 per cent to 4.65 per cent, effective from Friday, November 8. This followed the US Federal Reserve’s decision to lower the target range for the federal funds rate by 25 basis points to 4.5 to 4.75 per cent. In a statement, the Fed said the decision is based on general improvement in labour conditions, growth in the economy and lower inflation. The UAE follows US monetary policy as the UAE dirham is pegged to the US dollar.

With lower rates, loans will get cheaper. Thus, people seeking mortgages to buy homes, automobiles or even personal loans can look forward to lower monthly payments, analysts said.

Gold prices surged over 1.7 per cent after the Federal Reserve delivered a widely anticipated 25 basis point interest rate cut. “While the market had largely priced in this move, the Fed’s acknowledgment of economic uncertainty and balanced risks bolstered gold’s safe-haven appeal,” Mohamed Hashad, chief market strategist, Noor Capital, said in a note.

The Federal Reserve’s monetary policy decisions significantly impact gold prices. Lower interest rates typically weaken the US dollar and boost demand for gold as an inflation hedge and safe-haven asset. Conversely, higher interest rates tend to strengthen the dollar and reduce gold’s appeal. “A break above $2,700 could target the 20-day SMA [simple moving average] at $2,716 and potentially reach $2,750,” Hashad wrote.