With the Reserve Bank of India (RBI) hiking the repo rate by 25 basis points, the home loans and vehicle loans are set to attract higher interest rates. The measure was taken by RBI to counter rising prices. The impact of a 25 basis points increase on EMIs for home and auto loans will be Rs 16 per lakh. So if you take a loan for Rs 10 lakh for 15 years tenure at 11.5% interest you were paying an EMI of Rs 11,682 now with .25% increase the EMI will become Rs 11,842. Experts say this increase by the RBI by itself may not lead to any immediate increase in lending and fixed deposit rates unless there is a rate war over savings bank accounts.
There is also good news. The Reserve Bank of India has asked the banks to waive off the pre-payment charges in floating rate loans. This will come as a relief to home loan borrowers, who are already stretched and grappling with rising interest rates.
The is also cheering news from the Union Cabinet. The Cabinet on Tuesday decided to liberalise the norms under its one per cent interest rate subsidy scheme for housing loans.
Following the decision, the subsidy would be available for loans up to Rs.15 lakh as against the present limit of Rs.10 lakh. It also decided to relax the eligibility criteria in regard to the cost of the house. The subsidy would be extended for houses costing up to Rs.25 lakh. At present, one percent susidy is applicable to only those houses costing less than Rs.20 lakh.
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