💸 Why You (Yes, You) Should Care About Interest Rates (Even if Economics Makes You Yawn)

If you’re an expat living in the UAE, it can feel like money stuff just happens to you. Rent goes up. Car loans get more expensive. One day your high interest savings account says “6%,” the next it’s 4.5%, then 3.75%.

But behind all this noise are real forces shaping how much you earn on your money, how much you pay to borrow, and how far your dirhams go.

Let’s unpack what just happened with interest rates and what it means for your life, in plain, no-BS English.

🧠 First, what do “macro” and “micro” economics even mean?

Macro = the big picture
Think: national interest rates, inflation, economic growth, oil prices, market moves, global trade. The stuff that shapes entire economies.

Micro = your world
Think: how much you pay on your mortgage, how much your salary stretches, whether your car loan is expensive, or your savings is earning anything at all.

They’re connected. Macro sets the climate. Micro is your daily weather. (I'm Irish, I had to get a weather reference in lol).

🌍 The Macro View: What’s Happening in the UAE and Globally?

📉 1. Central banks are lowering rates again

Last week (29th October 2025) as I'm writing this, the US Federal Reserve cut interest rates by 0.25%. Because the UAE dirham is pegged to the US dollar, the UAE central bank followed with its own cut. The base rate (UAE central bank benchmark) is now 3.90%.

This isn’t random. It’s a tool to influence the entire economy.

Why they cut: To make borrowing cheaper, encourage people and businesses to spend more, and stimulate economic growth. It also helps businesses struggling with high debt loads.

🛢️ 2. The UAE economy isn’t just oil and gas.

Non-oil sectors are growing fast:

• Tourism

• Real estate

• Logistics

• Financial services

• Green energy

• AI

The UAE’s economic growth forecast for 2025 is 4.8%, according to the International Monetary Fund, with much of that momentum coming from non-oil sectors like tourism, financial services, real estate, clean energy, and increasingly - artificial intelligence and advanced tech.

This pivot is intentional. The UAE isn’t just riding oil markets anymore. It has invested heavily to become a global hub for high-skilled expats, AI development, digital infrastructure, and innovation ecosystems. In fact, the IMF recently named the UAE as one of the most AI-ready economies in the Gulf.

Source: IMF – UAE Overview
Source: Gulf News – UAE among most AI-ready Gulf economies

🧾 The Micro View: How Does It Affect You Right Now?

💼 Example: Meet Shanequa, a 35-year-old expat in Dubai

Shanequa has:

• AED 100k in a high-yield savings space

• A mortgage priced at EIBOR + 2.5% (bank margin)

• A car loan

• A dream to retire early and move to Portugal

Here’s how rate changes affect Shanequa (and probably you too):

1. Savings accounts and “fixed spaces”

If you’ve seen bank ads offering “up to 6%” returns on fixed savings accounts, understand this. Those offers track policy rates. As central banks cut, banks may quietly lower those headline rates.

What to do:

• Check if your rate is fixed or variable

• Lock a short-term fixed rate if it still looks good. For example Wio Bank savings space offers 6% annual interest return with salary transfer. Or 4.5% fixed saving space once you hold a minimum of AED 35k.

• Don’t park all your cash in one account just because it’s paying high today

• Don't be shocked if interest rates drop

Macro: means interest rates drop.
Micro: means your savings earns less over time.

Note: These rates are true as of 07/11/2025 - they are subject to change. This is also not a banking recommendation.

2. Mortgages and refinancing

Most UAE mortgages are linked to EIBOR (Emirates Interbank Offered Rate). When the central bank cuts rates, EIBOR usually follows, though not always immediately.

🧾 What is EIBOR anyway?

EIBOR is the average interest rate that UAE banks charge each other to borrow money for short periods (like 1, 3, or 6 months).
Think of it as the base cost of borrowing in the local banking system.

When you take a mortgage, most banks use EIBOR as the starting point, then add a margin on top. For example:

Your mortgage rate = EIBOR + bank’s profit margin.
Example: if EIBOR is 4.2% and their margin is 2%, your total mortgage rate is 6.2%.

When EIBOR goes up or down, your monthly payment might follow - especially if your rate is variable.

Source: (central bank)

📊 Last year vs this year:

• 31st Oct 2024: 3-month EIBOR was about 4.64%

• 31st Oct 2025: 3-month EIBOR is around 3.58%

So, if Shanequa had a mortgage priced at EIBOR + 2% (bank margin), last year she was paying 6.64%. This year, it's closer to 5.58% - a drop since last year. The banks mark up % won't change but the EIBOR will fluctuate over time.

What to do:

• Check if your rate is due for reset soon

• Ask your bank if refinancing now could save you

• Don’t be afraid to negotiate or even switch lenders

Macro: means rate cuts encourage home ownership.
Micro: means Shanequa may pay a few hundred AED less per month on her mortgage.

3. Personal and car loans

Lower policy rates mean lower bank funding costs. That often leads to better deals on new loans, especially if you have a good credit score.

What to do:

• If you’re shopping for a car, check for promo rates

• Don’t upgrade your lifestyle just because borrowing is cheaper (if a loan wasn't in your plan, don't do it) it's still a loan.

Macro: means banks compete harder for your business.
Micro: means your next car loan could come with a lower interest rate.

4. Credit cards

Don’t expect miracles here. Credit card interest rates are sky high. They rarely fall just because the central bank cuts rates. It’s an industry practice thing, not an economic one.

Credit Card debt is a big NO NO. If you're paying the banks that high interest late payment penalties - double down on cutting that debt out of your life ASAP.

Credit cards can be great, but only if you're able to pay them off in full each month. If you're not doing that START NOW, otherwise consider cancelling it or learn quickly how to use your credit card wisely.

If you're in major CC debt.

What to do:

• Seek expert advice on debt management

5. Investments and long-term thinking

When savings yields go down, long-term investing becomes more attractive. Cash loses its glimmer. Stocks and bonds, despite being more volatile, look better for building wealth over time.

What to do:

• Revisit your money plan

• Consider investing in global, low-cost ETFs

• Don’t panic buy or panic sell

• Stay the course over the long-haul

Expat behavior tip: Many wait too long to invest until they feel "safe." But waiting usually means losing time in the market and time in the market is crucial.

🤔 Why Does the UAE Copy the US on Rates?

Because the AED is pegged to the US dollar, the UAE has to move in sync with the US Fed to keep the peg stable.

Imagine tying your small speedboat (UAE economy) to a cruise ship (US economy). You can steer a little, but if the ship turns, you follow.

This keeps your purchasing power steady when sending money abroad, investing in USD assets, or getting paid in dirhams.

🧭 What Should You Actually Do Now?

You don’t need to become an economist.
You just need to understand what direction things are moving.

Here’s a simple checklist for expats:

• Review where your emergency fund lives.

• If you don't have an emergency fund (start one).

• Ask your bank if your mortgage or loan rate can be improved.

• Revisit your long-term goals (buy, invest, retirement plan).

• Learn how global trends affect your day-to-day finances.

• Don’t wait until the news screams "recession" to finally care.

✉️ Let’s Talk: Here’s How I Can Help

If you’ve read this far, chances are you want to make smarter money moves, but maybe you’re unsure where to start.

Being an expat means freedom, but it also means complexity. When you understand the macro climate and your personal financial reality, you begin making personal money moves with clarity and confidence.

1. Let’s stop running on ignorance - it is not always bliss.

2. Let’s build the next chapter with intention backed with action.

Here’s what I suggest:

• Reply to this post via email - [email protected] and tell me your number one financial question right now?

• Subscribe to my free newsletter for Wednesday Wisdom - weekly insights on smart expat finance (you'll also receive my personal starter blueprint when you sign-up).

Note: This blog post is a simplified explanation of macroeconomics and microeconomics, intended for educational and informational purposes only. It does not constitute financial advice. For guidance tailored to your personal financial situation, please consult a licensed financial coach/planner/advisor.