SBI vs BoB vs PNB vs BOI customers: How much will your home loan EMIs increase after repo rate hike

Home loan EMI: With the hike in repo rate, the sixth time by the Reserve Bank of India (RBI), all existing home loans on floating rates of interest are likely to become expensive, as banks like State Bank of India, Punjab National Bank, and Bank of Baroda, among others, have decided to pass on the hike to customers. This will lead to an increase in the equated monthly instalments (EMIs) on home loans for buyers. Apart from the new borrowers, this is also going to impact the existing home loan borrowers too.

How much will EMIs increase?

The loan rates provided by the lenders are directly correlated with the repo rate. As a result, rising repo rates will also raise borrowing costs, and vice versa.

“The 25 bps rate increase today will increase the cost of EMIs by 2-4%. Borrowers will either need to pay more money to payback their loans or the term will need to be extended,” Amit Gupta, MD, SAG Infotech.

Following the RBI hike, the State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, and Indian Overseas Bank are the lenders that have increased their lending rates.

State Bank of India (SBI) home loan rate EMI calculation

In May 2022, if a person had taken a loan of ₹30 lakh from the SBI for ten years. The interest rate was 6.65 per cent, and the EMI they would need to pay the bank would amount to ₹34,294.

After the rate hike by SBI in February, at an interest rate of 9.15 per cent, the person will now have to pay an EMI of ₹38,247 on the same loan.

This means their EMI has jumped by ₹3,953 per month.

Bank of Baroda (BoB) home loan rate EMI calculation

In May 2022, a person wished to take a loan of ₹30 lakh from the Bank of Baroda for ten years.

Assuming the interest rate was 7 per cent, and the EMI they would need to pay the bank would amount to ₹34,833

After the rate hike announced by the bank in February, at an interest rate of 8.55 per cent, the person will now have to pay an EMI of ₹37,276.

This means their EMI has jumped by ₹2,443 per month.

Bank of India (BoI) home loan rate EMI calculation

According to the Bank of India website, “The effective RBLR w.e.f 08.02.2023 is 9.35% as per the revised Repo rate (6.50%).

In May 2022, a person wished to take a loan of ₹30 lakh from the Bank of India for ten years.

Assuming the interest rate was 7 per cent, and the EMI they would need to pay the bank would amount to ₹34,833

After the rate hike announced by the bank in February, at an interest rate of 9.35 per cent, the person will now have to pay an EMI of ₹37,276.

This means their EMI has jumped by ₹3,740 per month.

Punjab National Bank (PNB) home loan rate EMI calculation

According to the PNB website, “The RLLR has been changed from 8.75% to 9.00% {Repo Rate (6.50%) + Mark-up (2.50%)} w.e.f. 09-02-2023 for all customers. Along with RLLR BSP of 25 bps will be charged.”

In May 2022, a person wished to take a loan of ₹30 lakh from PNB for ten years.

Assuming the interest rate was 7 per cent, and the EMI they would need to pay the bank would amount to ₹34,833

After the rate hike announced by the bank in February, at an interest rate of 9 per cent, the person will now have to pay an EMI of ₹38,003.

This means their EMI has jumped by ₹3,740 per month.

Indian Overseas Bank (IOB) home loan rate EMI calculation

According to the Indian Overseas Bank, “Bank has revised the RLLR lo 9.357" (i.e. 6.50% + 2.857. = 9.357") with effect from 08.02.2023”

In May 2022, a person wished to take a loan of ₹30 lakh from Indian Overseas Bank for ten years.

Assuming the interest rate was 7 per cent, and the EMI they would need to pay the bank would amount to ₹34,833

This means their EMI has jumped by ₹3,170 per month.

"RBI has increased the repo rate by 25 bps, but the commentary by the RBI governor was dovish. Inflation is cooling down and it appears that this is perhaps the penultimate,if not last, interest rate hike this year. On an overall basis, the repo rate is still at the average historic rate. We do not see any reduction in demand for home and car loans, after this interest rate increase" said Mr. Amit Kumar Agarwal, CEO, and Co-Founder, NoBroker.

Increase home loan EMIs or tenure: What should borrowers do?

According to Archit Gupta, Founder, and CEO, of Clear, in case there is an increase in EMI due to an increase in interest rate, at first, the borrower can negotiate with the bank for a lower rate, even a few basis points can reduce the burden for you. In case the higher EMI is causing a strain on your monthly budget, it may be better to extend the tenure of the loan so that you can reduce the monthly EMI burden, however, by doing this, you will end up paying an extra interest component.

If the borrower can reduce expenses or generate an additional income to reduce outstanding loans that could be a better option in this rising rate scenario, rates have been rising in the recent past, Gupta added.

What should borrowers do?

“Prepayments are the only method to keep the cost of borrowing from escalating. It's crucial to take your time dividing up your assets and making prepayments. You may prepare for it instead. There are several methods you may go about doing it, depending on what works best for your financial circumstances,” said Amit Gupta.

Pankaj Mathpal of Optima Money Managers said that banks don't increase monthly EMI but raise the tenure of repayment. Though it is always advisable to repay the loan as soon as possible. So, a home loan borrower is advised to visit one's bank branch and enquire about the impact on one's monthly home loan EMI post-interest rate hike.