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.