How is a floor rate defined in mortgages?

A floor rate is the minimum interest rate a bank will apply to your mortgage once the fixed-rate period has ended. This rate is clearly stated in your mortgage contract.

After the fixed-rate term, your mortgage shifts to a variable rate, which is calculated by adding the bank’s margin to the Emirates Interbank Offered Rate (EIBOR). If the combined amount is higher than the floor rate, the variable rate will apply. If it's lower, the bank will still charge the floor rate as the minimum.

This protects the bank's earnings in case the EIBOR drops significantly. It's crucial to understand that after the fixed-rate period, you'll be charged either the floor rate or the variable rate, whichever is higher, which directly affects your future mortgage payments.