Home » What Are Current Home Loan Interest Rates After Repo Rate Hike By RBI?

What Are Current Home Loan Interest Rates After Repo Rate Hike By RBI?

by Steven Brown
Venture capital

The Indian finance market is highly volatile. The values of securities and their interests and dividends keep fluctuating as per the market. However, the Reserve Bank of India impacts financial instruments like equities, loans, interest rates, etc.

If you have taken a Home Loan, you should use a home EMI calculator to gauge the impact of these externalities. The calculator will factor in any interest rate changes by the RBI and adjusts your EMIs accordingly. Now let’s understand the effect of the Repo rate hike on the current Home Loan interest rates.

The Repo Rate Hike by RBI

Recently, the Reserve Bank of India raised the loan interest rate by 50 bps. This increase in the interest rate has impacted all kinds of loans, including Home Loans. As a result, all the loan provider have increased their current Home Loan interest rates to factor in the change.

The new rate will impact the people planning to take a fresh Home Loan in the financial year. This is because all the retail loan provider has now increased the interest rate by a few points to factor in the impact of the increase in the repo rate. Additionally, the increase in repo rate will also affect the existing Home Loan borrowers.

Current Home Loan Interest Rates

After the RBI’s repo rate hike, the loan provider has increased the interest rate for all Home Loans. You can use a home EMI calculator to assess its impact.

The current Home Loan interest rate is changed after an increase of 50 basis points. The hike aims at reducing inflation in the market. The rate at which commercial loan providers borrow money from the RBI is also increased. As a result, the lending institution has increased the rates to set this additional cost off. 

The repo rate has increased by 140 points in the current financial year. This means that the repo rate has increased by 1.4%. This will impact the interest rate of the Home Loans as most Home Loan interest rates are linked with the repo rate.

Therefore, the interest rate will rise from 6.5%-7% to 8% for the existing Home Loan borrowers. Most loan providers have increased their repo-linked lending rate for Home Loans. These rates range from 7% to 10% for the different loan providers. Also, these loan providers have added a risk premium to the increased interest rates. The risk premium ranges from 1% to 2%, depending on the provider. Therefore, the effective interest rate on Home Loans lies between 7.99% and 9.30%.

Impact of the Increase in Repo Rates on Home Loans

Most lending institutions will change the rates of the MCLR-linked long-term loans in the next six months. However, the changes in short-term loans will be reflected later. 

The 1.4% increase in the Home Loan interest rate will not impact the EMIs of the borrowers. Instead, the increase in the amount will result in an extension of the loan tenure. Therefore the number of EMI payments will change, but the amount of one EMI will not. However, borrowers should increase the EMI and offset the cost within the existing tenure. 

Additionally, the increase in the repo rate will impact the real estate industry at large. With the third increase in BPS this year, the interest rates have now crossed the red border. Hence, it has demotivated borrowers from taking Home Loans. Hence, the real estate industry is negatively affected.

Conclusion

The Reserve Bank of India is the apex financial institution in the country. Therefore, its prime responsibility is to maintain the nation’s economic balance. The RBI has come up with several reforms to ensure the balance remains. The hike in the repo rate was one such measure. The repo rate was increased to control the increase in inflation impacting the economy in general. Therefore, before you apply for a Home Loan, check the impact of the repo rate.

Read more blogs – businesspara

Related Posts

Logo businesspara.com

Businesspara is an online webpage that provides business news, tech, telecom, digital marketing, auto news, and website reviews around World.

Contact us: [email protected]

@2022 – Businesspara – Designed by Techager Team