Home Loans To Get Costlier As RBI Hikes Repo Rate To 5.90%

The Reserve Bank of India (RBI) on September 30, 2022, hiked its benchmark lending rate to 5.90 per cent, increasing it by 50-basis points. The move by the RBI was on predicted lines as inflation and the rupee continue to be a cause of concern by the banking regulator.

Banking regulators across the world have been increasing interest rates since the middle of 2022 as hostilities between Russia and Ukraine put higher inflationary pressure.

Recall here that this is the fourth time the central bank has increased the repo rate. After this hike, the RBI has effectuated a cumulative increase of 190-basis points in the repo rate since May 2022.

Experts are of the opinion that the apex bank would continue with the upwards tweaking of the repo rate in its upcoming policies. 

"We believe that with the aggressive global tightening continuing, the case for the RBI to continue front-loading its rate hikes – providing a soft defence for the rupee – has become stronger. We now expect the RBI to take rates up to 6.25-6.5% by fiscal year-end," HDFC Bank principal economist Sakshi Gupta said.

Impact on home loans

The move by the RBI may result in banks increasing home loan interest rates at a time when majority of prospective homebuyers are firming up plans to conclude their house purchases. However, banks may take a while before implementing this hike, giving buyers a small window to complete their purchase before rates move upwards.