RBI Monetary Policy: Rate hike may push home loan rates, EMIs up

in the last two policies reserve Bank of India The repo rate has been increased by 90 basis points. The first hike was by 40 basis points in May and later by 50 basis points in June.

At present the policy repo rate is 4.90%. In addition, the Permanent Deposit Facility (SDF) rate is 4.65%, and the Marginal Standing Facility (MSF) rate and the Bank Rate are 5.15%.

Currently, India’s CPI inflation is at 7.01% in June 2022 which has come down slightly from 7.01% in May. Inflation peaked at 7.79% in April this year. With this, inflation has remained above the RBI’s upper limit of 6% for the sixth consecutive month.

Many banks have home loan Rates from May to July this year. Most of the lenders have linked their lending rates to the repo rate.

The latest RBI data shows that the weighted average lending rate (WALR) on new rupee loans of SCBs increased from 7.86% in May 2022 to 7.94% in June 2022. Further, the 1-year average marginal cost of funds based lending rate (MCLR) of SCBs increased from 7.40% in June 2022 to 7.55% in July 2022. Also, the WALR on outstanding rupee loans of SCBs increased by 14 bps to 8.93% in June 2022.

How much rate hike can be expected in August policy?

Sumit Chanda, Founder & CEO, Jarvis Investments said, “While there are some signs of moderation in inflation, with Brent still above $100 and rupee depreciating, we can expect RBI to hike repo rate by around 50%. bps. However, what should be noted is their tone which has softened in the last few weeks where they do not want to compromise on growth to fight inflation. They are instead putting fiscal policies under pressure on prices. would like to address. Act to reduce the liquidity in the system to suppress the demand.”

While Shivam Bajaj – Founder and CEO of Avenor Capital said, “Two important factors will determine the MPC’s stance on rates in this meeting, whether inflation remains beyond the RBI’s comfort zone and GST collections, as well as PMI, consistently after The rate hike by the RBI in the early part of this year will give it confidence to continue with its fresh stance.This may align the market’s expectations towards a growth of around 30 bps. “

Further, Suvodip Rakshit, Senior Economist, Kotak Institutional Equities, said, “We believe that the RBI will increase the repo rate by 50 bps to keep (1) high but gradually falling inflation, (2) in sync with global monetary policy.” the domestic macro situation, (3) addressing external sector pressures by managing the interest rate differential, and (4) continuing with rate hikes. Arguably, the quantum of increase is in the 35-50 bps range. is finely balanced within. We continue to pencil in the repo rate at 5.75% till the end of FY2023.”

Further, Rakshit said that RBI’s deliberations are likely to include (1) the global monetary policy cycle and global growth outlook, (2) external sector imbalances manifesting under pressure on the Indian rupee, (3) global commodity prices. I will be centered around the recent easing. and (4) the domestic inflation and growth trajectory.

“We note that since the June policy, the Fed has surprised with the risks of narrowing the interest rate differential with 150 bps hikes in June and July policies. We believe domestic inflation While the concern of the outside sector may subside slightly, the concern of the outer sector warrants caution,” Rakshit said.

Will the hike in policy repo rate affect home loan rates?

Ravi Subramaniam, MD and CEO, Shriram Housing Finance, said, “The MPC in its August policy announcement is likely to hike rates above 35 bps, however, I have been told by other major central banks such as the US Fed or the ECB. Even in the absence of fresh shocks, the economic situation in India has improved marginally and hence there is no need for an aggressive rate path. In fact, any hike in the repo rate would go against a clear recovery in productive sectors such as housing and construction in which the economy Has the highest forward and reverse correlation. Inflation trajectory is above RBI’s comfort level of 4% (+/-2%).”

“Therefore, the MPC will opt to hike interest rates in small amounts, till the general price level falls within the RBI’s comfort band. Such guidance will allay the concerns of future rate hikes and reduce market volatility. Nerves will be calmed. Also, I hope the MPC will shift. “Policy stance from ‘calibrated tightening’ to ‘neutral’ in its upcoming resolution,” Subramaniam said.

According to Ashish Khandelia, founder, Certificate Capital, Earnest.me, the RBI has already indicated a withdrawal of its policy stance and increased the repo rate by 90 bps with effect from May 4, 2022. These hikes have brought home loan rates closer. ~7.50%. Another hike due tomorrow will lead to a hike in home loan rates, with the last year-end rates likely to be close to 8% +/-. The continued housing momentum in Q1 has demonstrated that the current home loan rates are still in acceptable territory and we can expect this momentum to continue even if rates reach ~8%.

Here are some of the home loan rates offered by major banks:

SBI Home Loan Interest Rates:

SBI levies interest rates on home loans based on the credit score of the borrowers. For regular home loans, SBI offers a rate of 7.55% on credit scores above or equal to 800, while the rate is 7.65% for scores between 750-799. For credit scores 700-749, the interest rate is 7.75%, and for scores between 650-699 the rate is 7.85%.

The interest rate on a credit score of 550-649 is 8.05%. Also, the bank offers a rate of 7.75% on NTC/NO CIBIL Score/-1.

The average rate of interest for a home loan is 7.37%.

The interest rates are floating in nature and are linked to the repo rate.

HDFC Bank Home Loan Interest Rates:

The largest private lender’s retail prime lending rate (RPLR) currently stands at 16.05%.

For home loan amount 30 lakhs, the bank offers an interest rate of 6.75-7.25% to salaried women and 6.80% to 7.30% to others.

on a home loan between from 30.01 lakh 75 lakhs, the rate is 7-7.50% for salaried women and 7.05-7.55% for others. While the rate for salaried women is 7.10-7.60% and for others on home loans above 7.15-7.65% 75 lakhs.

These interest rates are the same for self-employed borrowers.

ICICI bank home loan interest rate.

For salaried borrowers, ICICI Bank offers interest rates between 7.60-8.05% on home loans 35 lakhs, while the rate on loans above is 7.60-8.20% from 35 lakhs 75 lakhs; and above the rate is 7.60-8.30% 75 lakhs.

RR is the lending rate linked to the repo rate.

Meanwhile, for self-employed borrowers, the private banker offers an interest rate of 7.70-8.20% on home loans. 35 lakhs. The interest rate on the above home loan ranges between 7.70-8.35% from 35 lakhs 75 lakh, and the rate is 7.70-8.45% on loans above 75 lakhs.

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