RBI Hikes Key Lending Rate by 25bps, Home Loans To Get Costlier- Know How to Minimise Rising EMIs

New Delhi: In order to strengthen its fight against inflation, the Reserve Bank of India (RBI) today (February 8, 2023) increased the repo rate, the benchmark lending rate, by 25 basis points to 6.50 percent. The rate at which the central bank loans money to commercial banks is known as the repo rate. The ruling opens the door for banks in the public and private sectors, housing finance organisations, and other lending institutions to raise interest rates on all types of loans.

Existing and new borrowers would soon have to pay higher EMIs for their loans as banks and lending institutions raise interest rates in tandem. Here are the options home loan borrowers have to lessen their EMI burden. (Also Read: Brace to Pay More EMI for Your Home Loan! RBI Hikes Repo Rate - Here's What it Really Means for Borrowers)

Increase EMI or Loan Tenure

Existing home loan customers have two options for reducing the effects of rising interest rates: lengthening their loan terms or increasing their equated monthly installments. Nowadays, the majority of banks want to prolong the loan term while maintaining stable EMIs. Therefore, if the loan term is prolonged, the interest cost will significantly increase.

Prepayment of Home Loan

Borrowers may want to think about prepayment in order to avoid the escalating expense of interest. Following the rate increase announced by the RBI in December, several banks increased the rates on their repo-linked home loan products.

The RBI forecast retail inflation today at 6.5 percent for 2022–2023 and 5.3 percent for the upcoming fiscal year. For 2023–2024, it predicted a 6.4 percent GDP increase. The Indian economy is steadfast despite erratic global trends, Das added. The Governor revealed the outcome of the six-member rate-setting panel's decision on Wednesday.