Such a heartwarming move for the millions of home loan borrowers across the country, as the Reserve Bank of India (RBI) would now change regulations unprecedentedly, which would eventually lower the amount they pay monthly in EMI (Equated Monthly Installment). These positive changes come with the continuous progressive the RBI intends to do in making affordability more favorable, providing relief to middle-class families financially, and spurring economic activity in the segments of real estate and housing.
It is mostly the repo rate directly affecting the lending rates of banks that saw major changes in that directive of the central bank. The last 50-bps cut in the repo rate mandated the lending institutions to immediately pass on the benefit to the borrowers through reduced interest on home loans, which resulted in a great drop in EMIs.
How Much Will You Save?
The drop in EMIs on average would be around ₹800-₹2,000 per month depending upon the amount of loan, interest rate, and tenure. For a 20-year home loan of ₹40 lakh, it would be pegged at nearly ₹1,400 reduced EMI. This cumulatively translates into over ₹3.3 lakh savings in the whole loan life.
Those having floating interest rate loans will, however, be the first to reap the benefits because the new interest rates made applicable by the banks after the cut in the RBI repo rate will automatically reflect the lessened borrowing cost. Borrowers with fixed rate loans may not feel the effects for the time being, but can switch to a lender at those lower rates if they want to.
Impact On The Economy
It is possibly going to create consumer comfort and enhancement in purchasing capacity, primarily to the middle-class segment. Again, the real estate sector, which was rather flat on demand, is anticipated to receive more inquiries and sales opportunities. Experts feel that this could mean a short turnaround for the housing market while carrying along some allied industries like construction and interior designing.
What Should Borrowers Do?
Upon getting the latest applicable EMIs which can be availed at various banks regarding their interest rates, borrowers should push for a switch to a lender with a lower-rate offering or renegotiate his or her terms with their current lenders if they are holding old loans at high rates.
Conclusion
This latest round of action from the RBI offers some easing to many home loan holders. Thus, people are under less burden because of lowered EMIs with an added revenue to overall economic movement.
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