UAE Interest Rate Trends in 2014

In 2014, we saw record profits for UAE banks amid strong growth in personal lending. Many financial institutions saw their balance sheets increase compared to 2013; what this essentially means is that the total value of loans they made increased.

Personal lending accounts for approximately 22% of all bank loans. The fact that it grew around 15% in the third quarter of 2014 compared to the previous year can be due to a combination of factors such as:

  • more flexible credit criteria from banks;
  • healthy banking sector;  and
  • increased demand for credit cards and loans.

The demand for lending products is affected by interest rates; in general, the lower the interest rate, the higher the demand (since it costs a borrower less in interest payments). So how did interest rates in the UAE change in 2014? We tracked the average rates for each product category over the last year.

Credit card interest rates in the UAE

The average annual rate for credit cards did not follow any specific trend in 2014. It fluctuated between 31.5% to 34% throughout the year.

Average credit card interest rates in the UAE

Personal loan interest rates in the UAE

The average reducing interest rate for personal finance started at around 16% at the beginning of the year, and declined steadily toward 9% by September 2014. We saw aggressive competition between banks for the best personal loan offerings, and as a result, the rates decreased by half during the year.

Average personal loan interest rates in the UAE

Car loan interest rates in the UAE

As with personal loans, the average auto loan interest rate steadily declined throughout the year. However, the relative decrease was less as rates went down by about 20% during 2014.

Average car loan interest rates in the UAE

Home loan interest rates in the UAE

The average mortgage rate decreased significantly during 2014. While the average at the start of the year was 8.4%, it went down all the way to 4.6% during the year (a decrease of 46%!). In addition, we saw a variety of interest rate structures introduced to the market.

Average home loan interest rates in the UAE

Some UAE banks now provide multiple home loan options that allow you to choose if you want the interest rate fixed for the first 1, 3 or 5 years. The higher the fixed-rate period, the higher the interest rate. On the other hand, other lenders provide only variable rates that change on a quarterly or semi-annual basis.

How interest rates will change in 2015 is anyone’s guess. But considering how low they dropped in 2014, it is unlikely we will see any drastic decrease in interest rates this year. 

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