Home / News / India /  RBI monetary policy: 25 or 35 bps rate hike, how will it impact home loan EMIs

25 basis points or probably 35 basis points, or another 50 basis points hike? All eyes await to know what will be RBI's rate hike outcome in December 2022 monetary policy scheduled for tomorrow. The majority of experts believe in a rather moderate rate hike in policy repo rate instead of a fourth 50 bps hike! The reason would be an easing in CPI inflation data below 7% in October. This fiscal, since May, RBI has hiked the repo rate by 1.9% to tame multi-year high inflation which also led to a significant climb in home loan EMIs.

Since banks have linked their lending rates with repo rates on various term loans, and hence, any change in the repo rate will have an effect on the EMIs as well. Banks have been hiking their benchmark lending rates since May, hence pushing EMIs upward.

Currently, the policy repo rate is around 5.90%. While the standing deposit facility (SDF) rate stands adjusted to 5.65% and the marginal standing facility (MSF) rate and the Bank Rate to 6.15%. MCP remains focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.

As per RBI data on lending rates dated November 30, the weighted average lending rate (WALR) on fresh rupee loans of banks increased to 8.68% in October 2022 compared to 8.59% in the previous month. While the WALR on outstanding rupee loans of banks climbed by 13 bps from 9.22% in September to 9.35% in October 2022. Further, 1-year MCLR jumped to 8.05% in October from the previous month's print of 7.90%.

How will RBI's either 25 basis points or 35 basis points impact the home loan EMIs?

Umesh Mohanan, Executive Director & CEO, Indel Money said, "With the high-frequency economic indicator denoting healthy recovery, the MPC is likely to keep the rate hike moderate this time."

According to Anand Nevatia, Fund Manager - Trust Mutual Funds, while a rate hike of 35bps is broadly discounted in the yields, markets are expecting a slightly dovish tone from the MPC. The voting will also be keenly watched to see if more members believe whether further rate actions should be done only after a proper assessment of the past rate hikes. The MPC however would be mindful of risks emanating from global volatility and recession fears across developed economies.

From a real estate perspective, Shishir Baijal, Chairman and Managing Director, of Knight Frank India said, the mortgage rates have increased in line with the MCLR and the cumulative growth in residential sales in the last six months has understandably begun showing some signs of slowing. The affordability of home buyers has also reduced by 10% since the beginning of this interest rate hike cycle.

Hence, Baijal added that a 30-35bps of a repo rate hike by the RBI would be reasonable in this cycle to address inflation without impacting growth to a large extent. A comparatively lower impact on mortgage rates will also be helpful in supporting homebuyer demand as the year draws to a close.

Meanwhile, Ravi Subramanian, MD & CEO of Shriram Housing Finance highlighted that there is a sign of inflation cooling off as CPI-based inflation in October is at its three-month low of 6.7%. This is still higher than the RBI's tolerance limit of 4-6%.

Shriram Housing Finance MD added, "We expect a moderate rate hike of 25-35 basis points this time around. Since the housing loan demand, especially in the affordable sector, is not very sensitive to interest rate fluctuation, it won’t immediately affect the home finance business. RBI's directional approach will be closely monitored by the industry, which is waiting for long-term signals. In order to bring about stability in the market, we look forward to a clear indication."

Meanwhile, Aditya Damani, Founder, and CEO of Credit Fair said, "Current inflationary pressures are largely imported, and we shouldn’t worry much about it. As far as food price is concerned, the domestic supply side is intact and a good Rabi harvest will further strengthen the rural economy. So, the demand for retail loans may remain robust. However, the repo rate touching the 6.2 percentage levels in a period of eight months is a bit tricky and, going forward, it will affect consumer sentiments."

Check out some major banks home loan interest rates:

SBI home loan interest rates:

SBI is currently offering home loan rates as low as 8.40% under its festive offer. The bank is giving a concession of 15 basis points to 30 basis points on its home loans from October 4, 2022, to January 31, 2023. While under the bank's festive campaign offer, the rates are cheaper from 8.40% to 9.05%. There are zero processing fees on SBI's regular and top-up home loans. However, to avail of the lowest rate and cheaper EMIs, your CIBIL score matters.

HDFC Bank home loan interest rates:

As of now, HDFC Bank's retail prime lending rate is 17.95%.

The bank's rates are 8.60% to 9.10% for women salaried borrowers on home loans up to 30 lakh, the rate is between 8.60% to 9.10% for self-employed. For the others category, here, the rate is 8.65% to 9.15% if the borrower is salaried and 8.65% to 9.15% if they are self-employed.

On home loans between 30.01 lakh to 75, salaried women borrowers will pay rates ranging from 8.85% to 9.35%, while self-employed to pay 8.85% to 8.35%. For others, the rates are 8.90% to 9.40% for both salaried and self-employed.

Meanwhile, on home loans from 75.01 lakh and above, the rate is 8.95% to 9.45% for women and 9.00% to 9.50% for other categories either salaried or self-employed.

ICICI Bank home loan rates:

The salaried employees here will have an interest rate from 8.60% to 9.35% on home loans either up to 35 or above 75 lakh. The rates are the same for the amount borrowed.

Similarly, for self-employed borrowers, the rates range from 8.70% to 9.50%.

Earlier, the bank had a festive offer where it was offering home loans at 8.40% and 8.50% depending upon a borrower's credit score. However, the offer has ended with effect from November 30, 2022.


Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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