The Reserve Bank of India (RBI) has just announced a hike in the Repo Rate and it seems, borrowers who were hoping for a respite from high-interest rates will have to wait a little longer. This increase in the repo rate is likely to influence the interest rate of the existing home loans and hence, in such situations, home buyers are likely to have this question: would it be beneficial to avail home loans in India now? Before we answer that, let’s understand repo rate and the reverse repo rate a bit.
What is the REPO Rate and Reverse REPO Rate?
Starting with repo rate, it is basically the rate at which RBI lends money to the bank. For instance, let’s say you apply for a loan at any bank but they don’t have that much money in their cash reserve. In such circumstance, the bank will avail a loan from the RBI and use that money to while approving your loan application.
Similarly, the reverse repo rate is the rate at which a bank lends money to the RBI. You can also refer to it as interest a bank gets when they deposit their money with the RBI.
How would the REPO Rate affect your Home Loan?People who have been waiting for an interest rate cut would have to extensively compare the available schemes before applying for it. It would be the best time to get a home loan because the repo rate is likely to go up further and hence, loans are going to get expensive.
Besides, existing home loan subscribers would have to pay higher interest towards their loans.