New Delhi: The Reserve Bank of India’s 25 basis‑point repo rate increase to 5.50 per cent on Wednesday is likely to push up borrowing costs for home loan borrowers on floating rates.
Floating‑rate home loans, which move with market benchmarks such as the repo rate, typically cost 1–2.5 per cent cheaper than fixed‑rate options and are widely used by retail borrowers.
When the RBI raises the repo rate, banks generally pass on the higher cost by raising lending rates, which can translate into higher equated monthly instalments (EMIs) or longer repayment tenors for existing borrowers.
As RBI hiked the interest rate by 0.25 per cent, banks are likely to increase their lending rates by a similar margin. Hence, home loans of consumers earlier at an interest rate of 8 per cent, could rise to around 8.25 per cent if the full increase is passed on to the borrower.
Experts urged customers to keep checking banks’ official sites for latest updates as the exact impact on your particular home loan will likely be updated by your bank soon.
The critical three-day monetary policy committee (MPC) meeting came at tensions in West Asia, higher crude oil prices and concerns over food inflation are putting pressure on the economy.
The RBI last raised the repo rate in February 2023 by 25 basis points and kept the rate unchanged through 2023-24 before starting its rate-cut cycle in 2025. Analysts had forecasted the MPC to raise the repo rate by 25 basis points, largely as part of efforts to control inflation.
RBI Governor Sanjay Malhotra said that given the current conditions, rate cuts are off the table in the near term, changing policy stance to ‘Calibrated Tightening’.
Policy action ahead can only be a repo rate hike or a pause, depending on the evolving conditions and the outlook, he said after the three-day MPC meeting.
(IANS)
