look news india
A very worrying news is coming out for the common citizens and middle class families who are thinking of fulfilling their dream of owning their own house. There has been turmoil in the banking sector of the country after the changes made in the repo rate and monetary policy by the Reserve Bank of India (RBI). Giving a big blow to their customers, the 5 major and largest banks of the country have increased the interest rates on home loans.
The direct effect of the increase in interest rates is that the monthly installment (EMI) of those who have already taken a home loan has increased, while for new customers too, buying a house will now prove to be much more expensive than before. In this era of inflation, the cost of home loan is expected to put a huge additional financial pressure on the household budget of the common man.
According to the latest data released by the banks, the major financial institutions of the country which have increased the home loan rates include big government and private sector banks. Top banks like State Bank of India (SBI), HDFC Bank, ICICI Bank, Bank of Baroda and Axis Bank have revised their External Benchmark Lending Rate (EBLR) or Marginal Cost Based Lending Rate (MCLR).
If a customer has taken a home loan of Rs 50 lakh for 20 years, and the interest rates increase by 0.25 to 0.50 per cent, his monthly EMI will directly increase by Rs 1,500 to Rs 3,000. If seen annually, this additional burden amounts to thousands of rupees, due to which the financial equations of home buyers are completely disturbed.
Whenever banks increase home loan interest rates, customers have two main options: either increase the amount of their monthly EMI so that the loan can be completed within the stipulated time, or leave the EMI the same and the bank increases the loan tenure. Most financial experts recommend that customers should choose to pay increased EMIs if the economic situation permits, as longer loan tenures ultimately result in higher interest charges to the bank.
In this environment of rising interest rates, adopting the option of loan pre-payment can also prove to be a wise step, due to which the principal amount reduces rapidly and the total interest burden reduces to a great extent.
Real estate experts and banking analysts believe that in the coming months, the direction of home loans will depend on global economic indicators, retail inflation data and the next steps of RBI. If inflation comes under control in the coming time, the central bank may give relief in rates, but for now the situation remains tight.
Those planning to buy a new home are advised to compare loan offers from different banks, understand the pros and cons of fixed and floating rates and only then sign a long-term financial agreement so that the budget does not become unbalanced.