What you should know about EIBOR if you are a real estate buyer in Dubai?
What is EIBOR?
Emirates Interbank Offered Rate (EIBOR), also abbreviated as EBOR, is a daily reference rate, published by the UAE Central Bank, based on the averaged interest rates at which UAE banks offer to lend.Few aspects to know about it if you are a potential home buyer:
What have banks done to help this situation?
- UAE mortgage rates are linked to EIBOR, which has seen incremental increases over the years
- The interest hike is attributed to the rise of the US Federal Reserve rate
- The latest EIBOR system which was introduced in April 2018, is said to be a ‘win-win’ because it is expected to make the system efficient and more accurately capture the risk factor
- In the existing system, there is too much variation between banks' EIBOR quotes on any given day due to the absence of a standard procedure across banks to decide the quotes
- Banks lend to each other on an overnight, one week, one month, three-month, six-month and one-year basis.
- All these rates have a slight difference. This changes your installments on a monthly basis and affects your cash flow. This can affect your credit score which will affect you when you want to take loans in the future
What are the rates like?
- Banks have created constant installments and will not change installments if you opt for one type of EIBOR. Your installment will same throughout
- This way your cash flow remains the same and your credit score does not get affected
- Every installment consists of the principal amount and interest rate. The bank keeps the EIBOR constant by reducing the principal if the interest rate rises