RBI hikes lead to an increase in home loans

The RBI hikes have led to a rise in tenure for The 20 year are now 24 years long, according to a report by Economic Times ET on Thursday. The borrowers who took long-term 2 years ago have seen a huge increase in their equated monthly installments EMIs which lead to elongation of the tenure.

The repo rate has been increased four times since April by 190 basis points bps to 5.9 per cent, as a result of high inflation. The home loan rates have gone up by nearly 140 basis points. The ET report stated that they are expected to rise further by 50 basis points in the coming days.

If a person took a 20 year home loan of Rs 50 lakh in April 2019, their number of EMIs will now be 60 more than the original because of the rate hikes, ET said. This would increase their original tenure from 20 years to 22 years and 10 months. The EMIs will now be more than 1,200 more than the original for a Rs 10 lakh loan for the next 20 years.

Governor said for the rest of the current financial year, inflation is expected to stay above the upper tolerance limit of 6 per cent.

Inflation projections are kept at 6.7 per cent in 2022 -- 23 with Q 2 at 7.1 per cent, Q 3 at 6.5 per cent and Q 4 at 5.8 per cent, with risks evenly balanced. The CPI inflation is projected to reduce to 5 per cent in Q1 FY24, Das said.

Experts suggest that the repo rate could be hiked in the coming months. The US Federal ReserveFederal Reserve Fed has taken a similar position on its rate hikes.

The borrowers can either pay higher EMIs to keep the tenure intact, according to the ET report. They can make a lump sum payment of the outstanding principal amount.