Your home loan just got costlier. The Reserve Bank of India (RBI) hiked the repo rate yet again on Aug.1, Wednesday. The central bank has announced a 25 basis points (bps) hike in the repo rate, thus, paving the way for an expected increase in home loan interest rate.
With the latest hike, repo rate now stands at 6.5 percent. It is to be noted that repo rate is the rate at which the central bank lends money to the other banks. One basis point is equivalent to one-hundredth of a percentage, ET Realty reported.
This is the first time since October 2013 that RBI has raised rates in consecutive meetings of its rate-setting panel. Earlier, repo rate was raised by 25 basis points in the June meeting. In fact, there is still a possibility of another rate hike this financial year.
This hike in repo rate will have a direct impact on home buyers since banks are most likely to increase interest rates on home loans. In fact, banks have started raising interest rates on loans even before the central bank started hiking key rates.
State Bank of India (SBI) and ICICI Bank raised marginal cost based lending rate (MCLR) in June this year. Going at this rate, it would be wise that you should not wait any longer to apply for a home loan if you are planning to borrow since the home loan interest rates are expected to go further up.
Like, if you planning to seek a loan of 30 lakh at an interest rate of 8.5 percent, then your EMI is likely to go up by Rs 477 from Rs 26,034 to Rs 26,511. The revised rate becomes applicable after the end of the reset period.
If your existing home loan is an MCLR-linked one, the EMI burden is likely to increase here. However, this hike in EMI will be felt by you when the reset date of your home loan arrives.