RBI's MPC meeting brings relief to home buyers as interest rates remain unchanged.
RBI Repo Rate: The Reserve Bank of India (RBI) has announced that it will not make any changes to the repo rate in its first Monetary Policy Committee (MPC) meeting for the financial year 2023-24. This decision is a relief for borrowers, as the EMI of their home loans will not become more expensive. The repo rate will remain at 6.50 per cent, and therefore, public-private banks and housing finance companies will not increase the interest rates of home loans.
This decision is significant because the RBI had increased the repo rate by 2.50 per cent in six monetary policy meetings during the previous financial year, making loans more expensive and putting a significant burden on borrowers' pockets. As a result of this increase, borrowers had to pay significantly higher EMIs on their home loans. For instance, on a home loan of Rs 25 lakh for 20 years at an interest rate of 6.75 per cent, the EMI was Rs 19,009. However, after the repo rate increased by 2.50 basis points, the interest rate increased to 9.25 per cent, and borrowers had to pay an EMI of Rs 22,897, which is an increase of Rs 3888. This means that the annual burden has increased by Rs 46,656 in a year.
Suppose a home buyer had taken a home loan of Rs 40 lakh at a rate of 6.50 per cent during the era of cheap home loans. In that case, after the RBI's decision, they would have to pay the home loan at a rate of 9.25 per cent, and their EMI would increase from Rs 29,823 to Rs 35,989, which is an increase of Rs 6166 every month. Due to costlier home loans in the last year, home buyers have been burdened with an annual EMI of Rs 73,992 more.
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