When the US Federal Reserve (Fed) held its policy rate steady again in August, the decision had relatively little impact on discussions across Dubai’s mortgage market. While the announcement was closely watched, its influence on local borrowing conditions is becoming less pronounced.
"It has barely registered," says Adriaan Rossouw, Head of Mortgages at Lomond. "Mortgage rates have generally remained unchanged, and most of our buyers aren't tracking the Fed at all. It's not a question clients ask anymore."
That marks a notable shift in a market where the dirham has been pegged to the US dollar for decades and the UAE’s base rate continues to move in line with Federal Reserve decisions. The policy relationship remains intact, but the extent to which those changes are reflected in local mortgage pricing has weakened.
Why Fed decisions are having less impact
UAE banks are increasingly managing rate movements within their own margins rather than passing each change directly on to borrowers. This partly reflects the current interest-rate environment, with rates having stabilised at levels well below the double-digit highs seen in previous decades. That gives banks greater flexibility to compete on mortgage pricing without adjusting lending rates in direct response to every Federal Reserve decision.
If it's not the Fed, what is driving demand?
With interest rates becoming a less dominant factor, Adriaan points to three forces currently shaping Dubai’s mortgage market.
Relocation remains a key driver, as new residents move to the UAE for career opportunities, quality of life and its tax environment. A second source of demand is coming from existing residents looking to upsize as their circumstances change, whether through marriage, growing families or a longer-term decision to remain in Dubai. A third group is responding to opportunities in parts of the market where pricing has become more favourable against the recent geopolitical backdrop.
Together, these factors are having a greater influence on mortgage demand than the timing of individual Federal Reserve decisions.
Cash buyers are playing a larger role
Dubai’s changing buyer mix is another sign that the market is becoming less sensitive to global rate movements. In the secondary market, around half of buyers use mortgage finance, while the share of mortgage-backed purchases has declined over the past year.
“That shift towards cash is structural rather than rate-driven,” Adriaan said. “Buyers are choosing cash for speed, simplicity and greater control over their liquidity.”
The trend is supported by continued demand from high-net-worth individuals, while cash buyers may also benefit from faster transactions and, in some cases, developer incentives for upfront payment.
With a significant share of transactions completed in cash or through developer payment plans, the direct impact of Federal Reserve policy on Dubai transaction volumes is more limited than in more mortgage-dependent markets such as the US or UK.
Why waiting for a rate cut may not help
For buyers delaying a purchase in anticipation of a future Federal Reserve rate cut, the potential benefit may be limited.
Expectations for the Fed’s next move remain mixed. Morgan Stanley currently expects rates to remain unchanged through 2026, with the possibility of cuts in 2027, while other analysts continue to highlight the risk of further increases if inflation remains persistent. There is therefore no clear consensus that materially lower rates are imminent.
Even if rates do fall, the effect on UAE mortgage pricing may be modest. The UAE’s most recent base rate cut in December was 25 basis points, from 3.90% to 3.65%, while current fixed mortgage rates of around 3.5 - 4.2% for shorter terms already suggest a relatively stable lending environment.
For buyers, this means waiting solely for a future rate cut may not necessarily result in significantly cheaper financing.
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