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<div type="image" title="In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Or, if it leaves the rates unchanged, your EMIs wont budge one bit" msid="114284206" hostid="261" caption="&amp;lt;p&amp;gt;In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Or, if it leaves the rates unchanged, your EMIs wont budge one bit&amp;lt;/p&amp;gt;"></div> On September 18, 2024, the <keyword id="19951097" type="General" weightage="20" keywordseo="us-fed" source="keywords">US Fed</keyword> delivered a jumbo-sized surprise to the global economy. Not only did they trim their interest rates by a massive 50 basis points to bring their yields down to 5%, but also hinted at further rate cuts in the upcoming months. This move from the fed and several other central banks globally had pushed expectations high for a similar rate slash closer home, from the <keyword id="19899808" type="General" weightage="100" keywordseo="rbi" source="keywords">RBI</keyword> this month. But governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword>, in a “picture abhi baaki hai” moment, decided to hold the repo rates here steady, leaving them unchanged at 6.5% for the record 10th straight time. Although, he did tinker with the policy stand, changing it from “rate cuts are absolutely off the table” to a more accommodating “we’re okay with bringing down the rates, if needed”. This, rather neutral, stance from India’s financial custodian sparked hopes for a rate cut in December this year. However, the stubborn <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> levels in September have again dented such hopes. As consumers, you may be wondering what all the hullabaloo this is about, since it hardly makes a difference to your regular financial routine. Well, the majority of both economic growth and inflation is closely connected to this policy stance from the central bank and it does have a rather indirect effect on both our earnings and spending. But more directly, it would have clear implications for those looking to own a house. Even the slightest modification of interest rates, or the lack of it, influences the <keyword id="19916018" type="General" weightage="20" keywordseo="emi" source="keywords">EMI</keyword> you pay significantly. So, all aspiring homebuyers, is this the right time to take out a loan and buy a house? Can you expect a rate cut anytime soon, and what will that mean for your home-owning dreams? We lay it out. <h2>What’s the connection?</h2>You see, buying a house is no small feat, at least financially. The task becomes even more herculean if you are scouting for your own roof in cities like Delhi, Noida, Bangalore or Mumbai where, as Circuit from Munnabhai says, “room shuru hote hi khatam ho jata hai”. Naturally, you’ll have to take a <keyword id="6354730" type="General" weightage="20" keywordseo="Home-loan" source="Orion">home loan</keyword> from the bank. Don’t be mistaken, the bank won't give you a loan that covers 100% of the value of the property you want to own. Rather, your loan amount will be equivalent to a certain percentage of the property’s total value. RBI’s guidelines on this are pretty clear: <ul><li>If your loan amount is up to Rs 30 lakh, you can get a loan worth 90% of the property’s value.</li></ul><ul><li>If the loan amount is between Rs 30 lakh and Rs 75 lakh, you are eligible for a loan worth 80% of the property’s value. </li><li>If you are taking a loan of more than Rs 75 lakh, your loan amount will be equivalent to 70% of the property’s value. </li></ul>Now assuming that you have the money, it's all about paying back the principal amount, but not without a little (read hefty) interest added on top. See, when you’re taking a home loan, you are actually signing up for a long-term, even multi-decadal financial commitment, which will unfailingly present itself to your bank accounts and finances every single month, in the form of EMIs, or equated monthly instalments). When you take a home loan, you can choose to pay the interest in two ways (talk about choices!). One is that you decide to keep a fixed rate of interest throughout the tenure of your home loan. So, if you opt for a 25-year fixed-rate home loan at the rate of 8.8% p.a., you’ll have to pay interest at this rate for the next 25 years, till your entire loan is paid off. Yes, you can go backsies and switch to a floating-rate home loan by paying a fee. Floating, as the name suggests, means that your interest rate is not set in stone. But starting October 2019, when it comes to a floating interest rate home loan, your payable interest and EMIs are directly impacted by any changes in <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword>, which were left unchanged by RBI this time around. Why are these two so chummy, you might ask. Well, <keyword id="173069" type="General" weightage="20" keywordseo="Home-loan-interest" source="Orion">home loan interest</keyword> rates are a sum of two things: <ol><li>Repo Rate (the rate at which RBI lends money to banks)</li><li>Operational cost + margins</li></ol>Any plus or minus in this equation would send your home loan interests tanking, or skyrocketing. Vivek Iyer, Partner, Grant Thornton Bharat explains that any change in the repo rates impacts the cost of funds and thereby the home loan interest rates. “When the interest rates are expected to reduce, the corresponding impact will be in the form of a reduced EMI. Home loan borrowers should always try to borrow at a floating rate when interest rates are expected to reduce and at a fixed rate when the interest rates are expected to increase. This minimizes the outflow in the form of EMIs that the home loan borrowers will experience”, he continues. So, no change in repo rates means no change in your home loan interest payout and no financial relief whatsoever. A rate cut, which most experts are anticipating will start this December, would mean your EMI payments come down, and your wallet might save a little more. But there’s also a chance of an UNO reverse happening. In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Consider this. You took a floating interest rate home loan worth Rs 50 lakh in January 2022 at 8% p.a., for a period of 20 years. This brings your total monthly EMI to Rs Rs 41,822. But, as luck would (or won't) have it, RBI raised the interest rate by 250 basis points between May 2022 and February 2023, bringing it to its current status of 6.5%. Some back-of-the-envelope calculations suggest that now, your home loan interest payout will also rise by a hefty 2.5%, taking the total to 10.5%. In other words, you’ll have to dish out Rs 49,919 per month as EMI. Now, won't you heave a sigh of relief if the RBI were to bring down the interest rate by say, even 50 basis points, or 0.5%? Agreed, your EMI will come down just marginally, to Rs 48,251. But look at this over a 20-year period, and you’ll see how big the difference is. <h2>Are rates set to change anytime soon?</h2>Generally, RBI hikes the repo rates if it sees inflation spiralling out of control. Then, in a bid to reduce consumer spending, it raises interest rates to make borrowing expensive. But when the apex bank sees sluggish consumption in the economy, inflation in control and wants to boost spending, it slashes down on interest rates, making it more lucrative for people to borrow. As of now, most experts are not anticipating any changes in the interest rates anytime soon. This means home loans are not getting cheaper anytime soon. The CPI data, which came out yesterday, saw inflation rise to 5.49% in September, compared to 3.65% last month. Food and beverage prices jumped to a four-month high of 8.36% in September, as opposed to a 5.3% rise in August. So a rate cut seems a no-go at the moment! Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities explains that the RBI had probably expected a hardening of inflation and that's why it chose to hold on to the rates in the monetary policy announcement last week. “Now, it seems that RBI will take a cautious stance going ahead and will not be in a hurry into rate cuts like its global peers”, he added. In all this, one thing is clear, in the grand movie of the Indian economy, the RBI has chosen stability over drama. And just like in every good Bollywood film, we're left wondering what twist the sequel will bring. Until then, it might be “The End" for rate cuts, but the show must go on for the Indian economy!

Simply Put: Boom or bust — how RBI’s decision to leave rates unchanged affects homebuyers

Mumbai: <keyword id="19949639" type="General" weightage="100" keywordseo="Rupee" source="keywords">Rupee</keyword> appreciated 8 paise to 83.89 against <keyword id="19949640" type="General" weightage="20" keywordseo="US-dollar" source="keywords">US dollar</keyword> in early trade on Friday, supported by a positive trend in domestic equities and a decline in the US dollar index. Forex traders said post the <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword>'s monetary policy announcement, markets now await for US CPI data, India CPI, WPI and IIP data and India's trade data all scheduled to be released next week. The Jackson Holes Symposium to be held after next week will also remain in focus, traders said. At the interbank foreign exchange, the rupee opened at 83.95 against the greenback, then touched 83.89, registering a rise of 8 paise over its previous closing price. On Thursday, the rupee consolidated in a narrow range and settled for the day lower by 2 paise at 83.97 against US dollar. Rupee was protected by the Reserve Bank of India (<keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword>) at 83.96 for this week and the local unit is likely to trade in a narrow range of 83.90/84.00 for the day after the RBI kept key benchmark rates on hold, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.03 per cent lower at 103.17. Brent crude, the global oil benchmark, advanced 0.15 per cent to USD 79.28 per barrel. "Brent oil prices rose to USD 79.22, a 3 per cent weekly gain, on rising Middle East tensions and better than expected US jobless claims data giving a better outlook on the US economy," Bhansali added. Market analysts said while the rupee seems to be tilting towards a negative bias, but sharp fluctuations are not anticipated. Meanwhile, the Monetary Policy Committee (MPC) of the Reserve Bank kept the benchmark repurchase or repo rate unchanged at 6.50 per cent. Announcing the bi-monthly monetary policy review RBI Governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword> said Indian rupee remained largely range-bound so far this financial year. Das further noted that the country's forex reserves touched a record high of USD 675 billion as on August 2. On the domestic equity market front, Sensex surged 958.63 points, or 1.22 per cent, to 79,844.85 points. The Nifty advanced 280.70 points, or 1.16 per cent, to 24,397.70 points. Foreign institutional investors (FIIs) were net sellers in the capital markets on Thursday as they offloaded shares worth Rs 2,626.73 crore, according to exchange data.

Rupee rises 8 paise to 83.89 against US dollar in early trade

The <keyword id="6354335" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword>), on Friday, left the key policy rate unchanged at 6.5 per cent in its monetary policy review for the seventh consecutive time, with the aim of keeping <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> in check and ensuring that the economy moves on a stable growth path. <keyword id="64190" type="General" weightage="20" keywordseo="RBI-Governor" source="Orion">RBI Governor</keyword> <keyword id="6359111" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="Orion">Shaktikanta Das</keyword> said that the decision was made with five of the six members of the <keyword id="6375120" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="Orion">Monetary Policy Committee</keyword> (MPC) favouring no change in the <keyword id="43352" type="General" weightage="100" keywordseo="repo-rate" source="Orion">repo rate</keyword>. Das said the MPC decided to continue with the "withdrawal of accommodation" stance to control inflation. The RBI would continue with its disinflationary policy to ensure a stable growth path for the economy, he added. Das said that <keyword id="120452" type="General" weightage="20" keywordseo="food-price-inflation" source="Orion">food price inflation</keyword> continues to weigh on the trajectory going ahead. The Central bank last changed rates in February 2023, when the repo rate was hiked to 6.5 per cent. The RBI had in fact raised rates by 2.5 per cent between May 2022 and February 2023, after which they have been kept on hold to support economic growth despite inflationary pressures in the past. Repo rate is the interest rate at which the RBI gives short-term loans to banks to enable them to meet their liquidity requirements. Inflation has now come down to around 5 per cent and is well below the RBI's upper tolerance limit of 6 per cent, but the Central bank is determined to bring it down to its medium-term target of 4 per cent, which it considers ideal for stable growth in the economy. RBI Governor Shaktikanta Das has stated several times that although inflation has been moderating, unless it falls to 4 per cent on a durable basis, the Central bank will not think of changing its policy focus. Prime Minister Narendra Modi said at an RBI event on Monday that the Central bank must give top priority to growth but at the same time, focus on trust and stability. With India continuing to clock the fastest GDP growth among the major economies, the RBI has ample headroom to keep interest rates on hold in the near term without hurting growth. The Indian economy had thrown up a surprise 8.6 per cent growth in the October-December quarter driven by government expenditure on big-ticket infrastructure projects and strong domestic demand. The macroeconomic fundamentals of the economy have turned stronger with the fiscal deficit well in control following robust tax collections. The lower fiscal deficit will help control inflation as well as leave more money in the banking system for corporates to take loans for investments as the government needs to borrow less. Economic indicators for the January-March quarter have also been encouraging with exports growing at a decent pace despite the disruption in ship movement due to the Houthi attacks in the Red Sea region. This has led to a decline in the current account deficit reflecting a stronger external balance of payments position.

RBI leaves key repo rate unchanged, focus on keeping inflation in check

Prime Minister Narendra Modi, on Wednesday, congratulated Reserve Bank of India's (RBI) Governor, Shaktikanta Das for bagging an A+ grade rating in the Global Finance Central Banker Report Cards 2024. Prime Minister in a post on social media "X" said, "Congratulations to RBI Governor Shri @DasShaktikanta for this feat, and that too for the second time. This is a recognition of his leadership at the RBI and his work towards ensuring <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword> and stability." <keyword id="20850250" type="General" weightage="20" keywordseo="RBI-Governor-Das" source="keywords">RBI Governor Das</keyword> has been awarded the A+ grade rating for the second consecutive year. The Central Banker Report Cards, published annually by Global Finance since 1994, grade the central bank governors of nearly 100 key countries, territories, and districts, as well as the European Union, the Eastern Caribbean Central Bank, the Bank of Central African States and the Central Bank of West African States. Grades are based on an "A+" to "F" scale for success in areas such as <keyword id="21364628" type="General" weightage="20" keywordseo="inflation-control" source="keywords">inflation control</keyword>, economic growth goals, currency stability and <keyword id="22859834" type="General" weightage="20" keywordseo="interest-rate-management" source="keywords">interest rate management</keyword>. "A" represents an excellent performance, down through "F" for outright failure. "Central bankers have waged war against <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword> over the past few years, wielding their primary weapon: higher interest rates. Now, countries around the world are witnessing the tangible results of these efforts, as inflation has dropped significantly," said Global Finance founder and editorial director Joseph Giarraputo. The RBI has been successful in controlling the larger macroeconomic situations in the country. The apex bank is actively working to push economic growth through its <keyword id="20900764" type="General" weightage="20" keywordseo="monetary-policies" source="keywords">monetary policies</keyword>. The RBI recently kept the the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> unchanged at 6.5 per cent after the deliberations of the Monetary Policy Commitee meeting earlier this month. The move reflects the central bank's cautious approach amid ongoing economic uncertainties. Announcing the monetary policy decisions, Das had said that the decision to keep the repo rate steady comes amidst persistent concerns about inflation, which remains above the RBI's target range. RBI Governor Das said that the inflation will moderate from July onwards as the monsoon has improved and global food prices have shown signs of easing in July. The Q1 <keyword id="19999655" type="General" weightage="20" keywordseo="Consumer-Price-Index" source="keywords">Consumer Price Index</keyword> (CPI) inflation for the current financial year (2024-25) is projected at 4.5 per cent. CPI inflation for the first quarter of the next financial year (Q1 2025-26) is projected at 4.4 per cent, as announced by the RBI Governor. India's retail inflation, after breaching 5 per cent in June, softened drastically in July. In line with the moderation in retail inflation, wholesale inflation in India too witnessed a sharp decline in July. The annual rate of inflation based on all India Wholesale Price Index (WPI) numbers is 2.04 per cent (provisional) for July 2024 (over July 2023).

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Simply Put: Boom or bust — how RBI’s decision to leave rates unchanged affects homebuyers

Ira Alok Puranik

Rupee rises 8 paise to 83.89 against US dollar in early trade

PTI

RBI leaves key repo rate unchanged, focus on keeping inflation in check

IANS

PM Modi congratulates RBI Governor Das on A+ rating in Global Finance Report

ANI

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