In yet another surprise move early this week by the RBI, the interest rates were further reduced by 0.25% or 25 basis points, taking it to 7.50% from 7.75%; this would make two cuts in less than two months and much ahead of its second bi-monthly monetary policy. The reduction in the key policy rates, the rate at which banks borrow from RBI to meet their short-term funding requirements, would have a very strong optimistic impact on the real estate sector as also on the home loan segment. This move is expected to bring a lot of buoyancy in the segment for which it had been a rather long wait.
Immediate benefitWhile most banks and HFIs were hesitant to pass on the benefit of reduction in the rates to borrowers last time around when it was done in January, this time they are expected to start passing on the benefit immediately and a single digit rate regime is going to make a grand comeback after almost 5 years. Home loan rates in the range of 9% is much to cheer about for both new borrowers and existing borrowers. The EMI outflow would be much lesser for those who have been under floating rates.
With the government mulling over the proposal to entrust the central bank with more responsibilities by way of setting targets on inflation numbers, the future of monetary policies is going to be different. This would be positive on both inflation and interest rate front.
The future looks bright for home loan borrowers since the interest rates may come down further considering the positive turn of events on the economic front.
Floating rate loans remain to be the best bet until another couple of rounds of rate cuts.
