The repo rate, or the short-term lending rate at which banks borrow from the central bank, has now topped 6% with the most recent hike. After a 40-basis-point hike in May and 50-basis-point increases in June, August, and September, this is the fifth straight rate increase. The RBI has increased the benchmark rate by 2.25 percent since May of this year.
In an effort to keep inflation under control, the Reserve Bank of India (RBI) increased the benchmark lending rate by 35 basis points (bps) on Wednesday. This is the fifth hike since May. The cost of loans, including mortgages, car loans, and corporate credit, will rise as a result of the rate increase.
Cyrus Mody, Managing Partner at Viceroy Properties, warned that the rate increase could hurt house sales. The majority of customers are searching for their own use rather than investing, therefore it seems improbable given the great traction we are seeing. We predict that demand for initiatives created by respected names will stay robust and have pricing power as we move forward.”
When the Reserve Bank of India raises the repo rate, the cost of lending for retail and other bank loans increases. The repo rate is the amount that the Reserve Bank of India charges to commercial banks when they borrow money from it.
Most banks and non-banking financial companies (NBFCs) have linked their lending rates to the central bank’s repo rate, so when the repo rate rises, so does banks’ repo rate linked lending rate. However, some retail loans, such as home loans and auto loans, are linked to an external benchmark set by the Reserve Bank of India (RLLR).
Atul Monga, the CEO and co-founder of BASIC Home Loan, claims that an increase in interest rates will be felt, especially by new borrowers, as it will normally only apply to future borrowings and not current borrowings.
It is still advisable to consider various payment strategies to minimise the impact of this rate hike, Monga said. These could include a home loan balance transfer or making extra payments.”