Experts said interest rate hikes could affect economic recovery and consumer sentiment.
A sharp fall in interest rates has boosted the demand for housing massively over the past two years.
The ever-increasing interest rates can hit the home loan segment hard.
New Delhi. Home loan interest rates have reached June 2019 levels due to four consecutive repo rate hikes by the Reserve Bank of India (RBI). Also, interest rates on all categories of loans are at a 3-year high. If the upward trend in interest rates continues in the coming days, the interest on home loans will also increase and this may dampen consumer sentiment. Experts say this could have a negative impact on the home loan segment.
In fact, the home loan segment saw a 16.4% rise in outstandings during the 12-month period ending August 2022. Whereas a year ago this increase was 11.6 percent. According to RBI data, home loan outstanding rose by Rs 2.51 lakh crore to Rs 17.85 lakh crore in the 12-month period ending August 2022, up from Rs 1.85 lakh crore to Rs 15.34 lakh a year ago. Crores of Rs.
Cheapest Home Loans – These banks and housing finance companies compete during the festive season, see full list
Interest rates at 3-year high
The repo rate was 4 percent in May 2020 but now it has reached 5.90 percent. Experts believe that there is a possibility of further increase in interest rates due to which the home loan sector may suffer severely.
Ravi Subramaniam, MD and CEO, Shriram Housing Finance said, “An aggressive hike in interest rates from here could impact the economic recovery and consumer sentiment. Soon after the RBI’s decision last week, H.D. FC hiked retail prime lending rate by 50 bps
Due to which home loan rates across all categories increased by 8.10-9%.
Fear of spoiling consumer sentiments
According to Chief Economist Samantak Das, the repo rate hike is not good for the real estate sector, especially the residential segment, as it will increase mortgage rates. From April 2022, the RBI has increased the repo rate by 190 basis points and this will increase the home loan rate.
India rose by an average of 80 basis points and is expected to rise further in the coming days.
Also Read- Why Avoid Fixed Interest Rate Home Loans? Learn the differences and advantages and disadvantages of floating and fixed rates.
Sales of residential units during the first half of 2022 have more than doubled compared to last year. Samantak Das said the repo rate hike last week will lead to an increase in home loan EMIs. Hence, if interest rates continue to rise, sentiment in the home loan segment may deteriorate. We believe that home loan interest rates of 9 percent or higher could slow housing sales growth in the medium term. At the same time, Anuj Puri, Chairman, Anark Group, said that the demand for houses has increased tremendously in the last two years due to the sharp fall in interest rates.
Hindi News 18 Be the first to read breaking news in Hindi. Today’s Latest News, Live News Updates, Most Trusted Hindi News Website News18 Hindi| Read on
Tags: Home Loan EMI, How to get cheap home loan, RBI
First Publication: 06 October 2022, 12:23 IST