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Borrowers and Credit Card Holders Beware!

17/5/2022

On 4 May 2022, the Central Bank of UAE (CBUAE) raised the Base Rate applicable to the Overnight Deposit Facility (ODF) by 50 points. This decision was influenced after the U.S. Federal Reserve raised its target rate by 50 points in the face of inflation.

CBUAE would maintain the rate of borrowing on short term liquidity from CBUAE, through all standing credit facilities at 50 bps above the base rate.

This would directly impact the interest rate advanced by the bank to the consumers and business owners, whilst borrowing loans.

The immediate result of the rate hike will strengthen the dirham, however it will adversely affect the borrowing costs including personal loans, car loans and mortgages. Consumers will have to pay higher EMIs, as higher rates will make it more expensive to buy a home/car or carry a credit card balance. Pertinently, credit card holders only with good credit history will now pay 18 % interest on average annually, and the interest rate maybe subject to further increase.

This is an endeavour by the Government to containinflation.  

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