Home loan terms have gotten longer as a result of the Reserve Bank of India’s (RBI) ongoing interest rate increases. According to a story published on Thursday by the Economic Times (ET), the 20-year mortgages now last 24 years. The equivalent monthly payments (EMIs) for borrowers who took out long-term house loans two to three years ago have significantly increased, lengthening the duration.
To combat excessive inflation, the RBI has increased the repo rate four times since April by a total of 190 basis points (bps), bringing it to 5.9%. As a result, there has been a nearly 140 basis point increase in home loan rates. According to research, they are anticipated to increase by another 50 basis points in the upcoming days.
As a result of the rate increases, if someone took out an Rs50 lakh (20-year) house loan in April 2019, they would now have to pay 60 more EMIs than they originally would have, according to ET. By doing this, their initial term would be extended from 20 years to 22 years, 10 months. The EMIs would now be Rs1,200 more than they were for an Rs10 lakh loan with a 20-year term.
The RBI’s most recent monetary policy decision left the inflation goal for FY23 at 6.7% unchanged. Governor Shaktikanta Das also stated that it is anticipated that the inflation would remain over the maximum tolerance range of 6% for the remainder of the current fiscal year. “With risks equally distributed, the inflation prediction for 2022—2023 is kept at 6.7%, with Q2 at 7.1%, Q3 at 6.5%), and Q4 at 5.8%. Inflation, as measured by the CPI, is anticipated to further decline to 5% in Q1FY24 “said Das.
According to experts, the RBI may continue raising the repo rate in the upcoming months. Similar views on its rate rises have also been expressed by the US Federal Reserve (Fed). The debtors can either pay higher EMIs to maintain the tenure, according to the ET article. Or, they might pay the entire amount of the outstanding principal in one go.