The Reserve Bank of India’s most recent action is expected to lower your monthly EMI for house loans by more than Rs 1,500. Banks are anticipated to reduce lending interest rates as a result of the central bank reducing the repo rate by 50 basis points, from 6% to 5.5%.
This may result in monthly savings of Rs 1,569 and yearly savings of around Rs 19,000 for a Rs 50 lakh home loan spread over 20 years, providing much-needed respite to borrowers in the face of rising living expenses.
The interest rate at which the RBI loans money to commercial banks is known as the repo rate. Banks can offer loans to consumers at reduced interest rates as this rate declines since it becomes more affordable for them to borrow money.
Borrowers are immediately affected by this, particularly those whose home loans are based on repo-based lending rates (RBLR).
Let’s use a real-world scenario to illustrate this. Let’s say you have a Rs 50 lakh home loan with a 20-year term and an interest rate of 8.5%.
In this scenario, your EMI would be around Rs 43,391 per month. Your new EMI would be around Rs 41,822 if the bank lowers your interest rate to 8% following the 50 basis point reduction in the repo rate.
Confederation of Real Estate Developers’ Associations of India (CREDAI) Secretary Gaurav Gupta praised the RBI’s monetary decision, stating that the rate reduction will assist in lowering borrowing costs for prospective homeowners. In addition to reducing monthly payments, it will increase the affordability of homes nationwide.
He went on to say that a decrease in mortgage rates helps not just individual purchasers but also the real estate industry as a whole, which supports a number of related companies.
Crucially, lower interest rates will result in lower EMIs for personal loans, vehicle loans, and other forms of retail borrowing, so it’s not simply home loans that will become more affordable.
