RBI holds key policy rates: How it will impact existing and new home loan borrowers
Admin 2023-12-19 15:17:46
The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday chose to maintain the repo rate at 6.5 per cent, affirming its dedication to stability while gradually scaling back accommodation to align inflation with the 4 per cent target. This stability is likely to bolster sentiments in the real estate sector, which is already experiencing positive trends in key markets across the country. Furthermore, consistent lending rates have the potential to encourage investments, fostering economic growth.
The RBI decision holds significant implications, particularly for both the existing and new home loan borrowers across the country. This acts as a crucial determinant in shaping lending rates, directly influencing the borrowing landscape for individuals seeking home loans. Here is how it will impact home loan borrowers.
For Existing Home Loan Borrowers
The unchanged repo rate brings a sense of stability for individuals with existing home loans. This decision implies that the interest rates on their current loans are unlikely to witness immediate fluctuations. Borrowers can breathe a sigh of relief as the Equated Monthly Instalments (EMIs) they have been accustomed to remain unchanged, at least in the short term. This consistency allows for better financial planning and budgeting, sparing borrowers from the anxiety of sudden rate hikes that might strain their finances.
However, it’s essential to note that while the repo rate remains steady, existing borrowers might not immediately benefit from potential rate reductions. Any future changes in lending rates depend not only on the repo rate but also on the policies and strategies adopted by individual banks or lending institutions. Therefore, existing borrowers should keep a keen eye on the policies of their respective lenders to take advantage of any favourable adjustments in interest rates.
For New Home Loan Borrowers
The decision to maintain the repo rate also holds implications for individuals planning to apply for new home loans. The unchanged rate presents a window of stability. Prospective borrowers can lock in their loans at the prevailing rates, secure in the knowledge that these rates won’t immediately increase. This stability allows them to plan their finances more confidently and proceed with their home purchase decisions without the immediate threat of escalating borrowing costs.
Moreover, with the repo rate being maintained at a consistent level, it offers new borrowers the opportunity to explore various loan products and lending institutions to secure the best possible deal. This stable borrowing landscape empowers new borrowers to conduct thorough research, compare rates, and negotiate terms to suit their financial capabilities and long-term plans effectively.
Additionally, lending institutions are also likely to compete by offering attractive schemes or incentives to attract new borrowers especially those with higher credit scores and stable income. This could translate into a variety of offerings such as lower processing fees, longer tenure options, or other favourable terms, providing new borrowers with an array of choices to explore.
Adhil Shetty, CEO, Bankbazaar.com, says, “Repo rates wield significant influence over the interest rates set by banks for various loans, including home loans. Changes in the repo rate directly impact these loan interest rates. With the current repo rate holding steady at 6.5 per cent, existing borrowers can rest assured that their Equated Monthly Instalments (EMIs) won’t be immediately affected. Prospective homebuyers may find relief in the stable repo rate, allowing them to plan their moves without concerning about imminent rate hikes.”
The steady repo rate ensures short-term stability and predictability in EMIs for the existing home loan borrowers whereas new borrowers will have an opportunity to secure loans at prevailing rates.
However, potential future changes in lending rates cannot be ruled out owing to various market factors and regulatory measures. As a borrower, you must keep your financial health stable and maintain a healthy credit score while paying your debts timely.