Will interest rates on home loans come down?
11:47 AM
The heat of increasing Home Loan Interest Rate on home loans has been felt by most home loan borrowers in the recent past. Then, the stringent monetary rules by the Reserve Bank of India left many borrowers see their financial burden increased by as much as 25%.
The article outlines the precautions existing home buyers should take. It also tries to answer the queries which appear to be on mind of every individual who wish to buy home loans:
The increase in interest rate brought by RBI was part of its strategy to curb inflation and credit growth in the economy. The inflation now stands below 5%. Recently, the authority increased the Cash Reserve Ratio (CRR) with a purpose to control inflation. It decided this move rather than increasing the benchmark interest rate is clearly indicative of no more hikes in interest rates now.
Industry watchers believe the interest rates to be at their peak or nearing it. This, however, has confused the new home buyers whether to opt fixed or floating loan rates.
Increased interest rates have largely affected the floating rate borrowers. This is why experts always suggest to wait and watch for the interest rates to come down. However, if you are buying house for your own use, it should not be affected by the interest arte cycle. But we would like to recommend you one thing - It is always better to go with floating rates as they ensure that borrower gets the advantage of interest rates coming down in near future.
Keep your eye on the trend followed by interest rates
Often, banks tend to increase the interest rates when the benchmark interest rates increase. But, such alacrity is not shown by them in decreasing rates whether the benchmark comes down or not. You will find it futile to ponder upon such a behavior of banks as they have their own clauses in home loan agreement to support their point. You must be careful for the downward revision of interest rate on your home loan even if there is no change in your EMI.
Therefore, if the interest rates show a downward trend in near future, ensure to discuss with your relationship manager from the lending bank and verify that the downward revision in your interest cost has been done.
A Shorter Term or a Smaller EMI?
As interest rates scaled up, borrowers were faced with the option of either lengthening the tenure of the loan or meet up with a higher EMI. Likewise, the lowered interest rates would mean that borrowers can either shorten the term or bring down the EMI.
Experts, however, advise short term loans as against smaller EMIs to ensure a lower interest payout. If the rates do increase further at a later date, borrowers always have a chance of increasing the tenure.
The Borrower's Options
When the current retail boom started, interest rates were at the lowest. Home loans surged as a result, in combination with other factors. Most of the borrowers took up the loans when the interest rates were at the lowest, or had started climbing up.
The article outlines the precautions existing home buyers should take. It also tries to answer the queries which appear to be on mind of every individual who wish to buy home loans:
The increase in interest rate brought by RBI was part of its strategy to curb inflation and credit growth in the economy. The inflation now stands below 5%. Recently, the authority increased the Cash Reserve Ratio (CRR) with a purpose to control inflation. It decided this move rather than increasing the benchmark interest rate is clearly indicative of no more hikes in interest rates now.
Industry watchers believe the interest rates to be at their peak or nearing it. This, however, has confused the new home buyers whether to opt fixed or floating loan rates.
Increased interest rates have largely affected the floating rate borrowers. This is why experts always suggest to wait and watch for the interest rates to come down. However, if you are buying house for your own use, it should not be affected by the interest arte cycle. But we would like to recommend you one thing - It is always better to go with floating rates as they ensure that borrower gets the advantage of interest rates coming down in near future.
Keep your eye on the trend followed by interest rates
Often, banks tend to increase the interest rates when the benchmark interest rates increase. But, such alacrity is not shown by them in decreasing rates whether the benchmark comes down or not. You will find it futile to ponder upon such a behavior of banks as they have their own clauses in home loan agreement to support their point. You must be careful for the downward revision of interest rate on your home loan even if there is no change in your EMI.
Therefore, if the interest rates show a downward trend in near future, ensure to discuss with your relationship manager from the lending bank and verify that the downward revision in your interest cost has been done.
A Shorter Term or a Smaller EMI?
As interest rates scaled up, borrowers were faced with the option of either lengthening the tenure of the loan or meet up with a higher EMI. Likewise, the lowered interest rates would mean that borrowers can either shorten the term or bring down the EMI.
Experts, however, advise short term loans as against smaller EMIs to ensure a lower interest payout. If the rates do increase further at a later date, borrowers always have a chance of increasing the tenure.
The Borrower's Options
When the current retail boom started, interest rates were at the lowest. Home loans surged as a result, in combination with other factors. Most of the borrowers took up the loans when the interest rates were at the lowest, or had started climbing up.
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