No Immediate Impact on Home Loan EMIs
The Reserve Bank of India's Monetary Policy Committee (MPC) has chosen to maintain the repo rate at 6.50% on April 5, 2024, signaling stability in lending rates. The committee with a majority of 5:1 retained the stance to withdrawl of accomodation while focusing on liquidity management to keep a check on inflation.
RBI kept the Repo Rate unchanged for seventh consecutive meet. Consequently, the Standing deposit facility (SDR) stands at 6.25%, while Marginal standing facility (MSF) and Bank rate retains at 6.75%.
This decision implies that there will be no immediate impact on real estate or home loan Equated Monthly Installments (EMIs). Since the repo rate remains unchanged, banks are unlikely to adjust their lending rates shortly, keeping EMIs stable for now.
Read more at: https://newsarenaindia.com/economy/rbi-s-mpc-meeting-convenes-lending-rate-decision-looms-amid-inflation-focus/7383
Different Impacts for Fixed and Floating Interest Rates
The impact may vary slightly depending on whether your home loan is on a fixed or floating interest rate.
Fixed rates are not directly affected by repo rate changes during the fixed period. However, floating rates tend to adjust with changes in the repo rate.
Pradeep Aggarwal, Founder & Chairman of Signature Global (India), commends the RBI's decision, stating that a stable repo rate provides confidence to homebuyers.
This stability directly affects the growth of the real estate sector, which is crucial for India's GDP and future prospects.
Dharmendra Raichura, VP & Head of Finance at Ashar Group, highlights the strategic decision of the MPC to maintain the repo rate, contributing to resilience in the real estate sector. Consistent home loan rates enhance consumer confidence, fostering an environment conducive to sustained development.
Understanding the Repo Rate
The repo rate is the rate at which RBI lends money to commercial banks.
By keeping it unchanged, RBI signals its intention to maintain the current level of liquidity in the banking system.
This stability often translates to banks holding off on immediate adjustments to their lending rates, directly impacting your home loan EMI.
Read RBI's previous MPC decision
Potential Future Impact
While the immediate impact is minimal, the RBI’s decision to hold the repo rate might change in the future. Factors like inflation or economic growth can influence future rate adjustments.
Even if the repo rate changes, banks have some discretion in setting their lending rates, which may not always fully pass on the change to borrowers.
However, if the repo rate decreases in the future and your bank lowers its lending rates, you might be able to renegotiate your EMI with your lender, potentially leading to lower monthly payments.
Impact on Real Estate Demand
Changes in interest rates affect the demand for real estate. Lower interest rates tend to stimulate demand as borrowing becomes cheaper, potentially driving up property prices.
Conversely, higher interest rates may dampen demand and lead to softer property prices.
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