The Reserve Bank of India is in charge of publishing the repo rate through its bi-monthly policy. The central financial institution in India can choose to keep the rate unchanged, increase or decrease it. The current repo rate is considered an external benchmark, and helps NBFCs and other lenders decide the interest rate on their consumer loan products.
The current repo rate can also be indicative of the overall economic condition of India. Lower rates represent a slowdown of the economy. Lowering these rates can cause more individuals or businesses to avail credit, thereby giving the economy a much-needed boost.
Repo rate changes can affect your home loan rates in the following manner –
- Increased repo rate can expand financial burden for borrowers – Individuals servicing a home loan with floating rates will have to bear increased EMIs when the repo rate rises.
- Decreased repo rate can reduce monthly EMIs – Similarly, when such rates are cut, borrowers can get away by paying a marginally lower amount as instalments. Thus, such a change provides increased disposable income in the hand of borrowers.
If you avail a housing loan under fixed terms, changes in repo rates will not affect the EMIs you need to bear. In such a case, one can refinance his/her existing dues to a different lender and take advantage of current rates. Even so, be mindful of the various fees and charges involved with such a move. These can be substantial and can limit savings from a balance transfer.
Additionally Read: Current Repo Rates: All You Need To Know
