EMIs set to go up as RBI hikes rates 50 bps

Home loan EMIs are set to rise, with Reserve Bank of India governor Shaktikanta Das announcing an increase of 50 basis points (half a percentage point) in the repo rate—the second hike in just over a month. The RBI’s six-member monetary policy committee voted unanimously on Wednesday to raise the repo rate—the rate at which RBI lends to banks —to 4. 9% in a bid to tame the rising inflation.

RBI’s action will automatically push up the cost of mortgages as over 90% of new home loans from banks are linked to repo rate. With this increase, the EMI on a Rs 1 crore, 20-year home loan would rise by Rs 3,029 from Rs 77,530 to Rs 80,559. Taken together with the May 4 hike, consumers are looking at a 90 bps increase in 35 days, a total increase of Rs 5,500 per month on such a loan.

Most economists expect further rate hikes in this fiscal year. Das said RBI now expects inflation to be at 6.7% in 2021-22, against 5.7% forecast in its April policy. However, he retained the GDP growth.

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