E-Paper
Sign In
UAE personal loan demand weakens amid slower economic growth, employment challenges
Net balance for personal lending demand slips to -6.0 percentage points in Q1 2026, with a steeper decline of -10.9 percentage points projected for the next quarter
- PUBLISHED: Sun 5 Jul 2026, 8:37 AM
Demand for personal loans in the UAE declined during the quarter, with the net balance falling to -6.0 percentage points (pp), according to the survey findings by the Central Bank of the UAE for the first quarter of 2026.
The Northern Emirates recorded the sharpest drop in demand, followed by Abu Dhabi, while Dubai registered the mildest decline.
Recommended For You
Personal loan demand weakened across all categories during the quarter, with credit card lending recording the steepest fall, followed by housing loans – particularly owner-occupier loans and the “other” category, which includes refinancing and renovations.
Stay up to date with the latest news. Follow KT on WhatsApp Channels.
The decline in demand is mainly due to the slowdown in the economy and its impact on the employment market amid regional political conflict.
Looking ahead, survey results point to a further weakening in personal loan demand next quarter, with the net balance projected to ease to -10.9pp.
Financial institutions expect demand to remain subdued across all personal loan segments next quarter, with the sharpest declines anticipated in housing loans – spanning owner-occupier, investment and other categories – as well as car loans.
Weaker economic conditions and seasonal factors weighed on demand during the quarter, although lower interest rates and changes in household income offered some support. Several financial institutions also pointed to heightened regional uncertainty, softer consumer sentiment and more cautious household spending behaviour as additional factors affecting personal borrowing demand.
Housing remains a bright spot
Financial institutions reported broadly unchanged credit appetite across personal loan segments overall. However, the net balance for lending appetite slipped by a modest -1.1pp during the quarter – a reading significantly below the long-run average, signalling that the positive momentum underpinning credit expansion in recent years is losing steam.
Lending appetite continued to improve across all housing loan categories – owner-occupier, investment and other – while it softened for non-housing investment loans, car loans, credit cards and personal (other) loans. Over the next quarter, appetite is expected to soften further, with the weakest readings projected for other housing loans (including refinancing and renovations), car loans and non-housing investment loans.
A weaker economic outlook and reduced risk tolerance weighed on lending appetite during the quarter, although improving asset quality and regulatory developments remained supportive. Banks also cited geopolitical developments, along with stricter adherence to internal financing policies and parameters, as contributing factors behind the softer appetite.
Rejection rates little changed
According to the Central Bank, credit standards remained broadly stable, with more than 90 per cent of respondents indicating no change. Where terms and conditions were adjusted, financial institutions cited higher premiums on riskier loans and wider spreads over funding costs, while loan-to-income (LTI) ratios and non-interest fees and charges eased modestly.
Personal loan rejection rates stayed mostly the same, only rising slightly by 1.1 percentage points. Car loan rejections went up, credit card rejections stayed about the same, and home loan rejections went down.
