A Brief roadmap for RBI repo rate rises in 2022!
Following recurrent inflationary shocks wreaking havoc on the economy, the top bank has abandoned the COVID-supporting measures. As a result, lending rates have returned to pre-pandemic levels.
The effect of a repo rate increase on house loan EMIs
The hike in the repo rate to 5.90 percent implies that new house loans will become more costly as interest rates rise. Former mortgages may suffer as well, however only those with adjustable interest rates. Fixed-rate mortgages will have no effect on the higher repo rate.
“We have noticed a healthy rebound in residential sales and launches in the previous couple of quarters,” says Ramani Sastri, Chairman and Managing Director of Sterling Developers Private Limited. From a real estate standpoint, the policy rate increase is a hindrance since home loan rates will rise, dampening homebuyer enthusiasm. As a result, the action will harm business mood at a time when the economy is still recuperating from the epidemic. However, there has been a major shift in buyer perceptions and expectations about homeownership, that could help to sustain the homebuying trend.”
Repo rate increase timetable
Below is a chronology of RBI announcements about adjustments in repo rates since October 9, 2020.
The RBI raised the repo rate by 50 basis points on August 5, 2022. This is the third upward adjustment this year, following hikes of 40 basis points and 50 basis points on May 4, 2022 and June 8, 2022, respectively. The revised repo rate is now at 5.4 percent.
The RBI raised repo rates by 50 basis points on June 8, 2022. This is the second rise this year, following a 40-basis point increase on May 4, 2022. The increased repo rate is now 4.9 percent.
Lincoln Bennet Rodrigues, Chairman and Founder of The Bennet and Bernard Company, stated that “The recent wave of raises may make purchasers nervous, and they may as well take a wait-and-see mentality.” On the plus side, ongoing pay and employment development in many industries will act as a short-term buffer for purchase decisions. The recent all-time low home loan interest regime stimulated housing demand and permitted a rapid comeback in the real estate sector following the epidemic. People today feel compelled to make gradual lifestyle adjustments in order to live a more balanced and healthier existence. We are optimistic that a more positive homebuyer attitude and preference for home ownership would strengthen the housing market. We anticipate that consumer demand will continue strong in the near future. The rate rise would have little influence on house loan interest rates since they have already fallen greatly in recent months, and these little adjustments may not influence purchasing choices. With increasing accessibility and discretionary money in the hands of new-age investors, the prognosis for India Inc appears favourable.”
May 4, 2022: The Reserve Bank of India (RBI) raised repo rates by 40 basis points (bps) for the first time in two years at its off-cycle monetary policy meeting. The updated repo rate is now 4.40 percent. The reverse repurchase rate, on the other hand, has remained constant at 3.35 percent.
June 4, 2021: For the sixth time, the RBI retained an accommodating stance on interest rates. The repo and reverse repo rates have remained constant at 4% and 3.5 percent, correspondingly.
April 21, 2021: For the sixth time, the RBI kept the repo rate and reverse repo rate at 4% and 3.5 percent, correspondingly.
5 February 2021: For the fourth time, the RBI kept key policy rates unchanged in order to protect the Indian economy from the effects of COVID-19.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.
