Get ready to pay more towards home, car loan EMIs as interest rates bottom out

Get ready to pay more towards home, car loan EMIs as interest rates bottom out

New Delhi, India:SBI’s home loan rates rose by 25 basis points on April 1 after the bank reverted to its original interest rates after withdrawing its “limited time bid.”Now, SBI’s new home loan rates begin at From April1, the rate will be 6.95 percent, compared to 6.7 percent until March31, 2021.Other lenders will soon follow suit and raise their lending rates for floating-rate loans, according to industry experts.             

“Even if the effect of the reward withdrawal is just 25 basis points, it may have a system-wide impact since other financial institutions typically follow SBI with a timetable.lag,” said Naveen Kukreja, CEO and Co-Founder of PaisaBazaar, as quoted by ET Wealth.It’s worth noting that HDFC, India’s largest mortgage lender, recently raised fixed deposit interest rates by 10-25 basis points after a 29-month hiatus.Another sign pointing to a reversal of the country’s declining interest rate trend, as it would boost the cost of funds for businesses.

The HDFC and loan rates must match.Since other mortgage lenders are following HDFC’s lead, any rise in HDFC’s loan rates would have a system-wide effect.What do borrowers who have already taken out a loan do? If you recently took out a home or car loan, banks will automatically adjust your interest rate if rates rise.

Rather than increasing the EMI, expand the loan’s term.If home loan rates rise by 50 basis points, you’ll have to pay an extra 23 EMIs on a Rs 50 lakh (outstanding amount) home loan with a 20-year tenor.You will have to pay an extra Rs 1,515 per month against your home loan EMI if you do not want to extend your loan tenor.

Borrowers reaching retirement age, on the other hand, do not have the opportunity to extend their loan term.As a result, they have no choice but to accept higher EMIs.Even if you have the opportunity to extend the term of your home loan, experts advise against doing so because it will increase your overall interest payment.

If your current earnings do not permit you to increase your home loan EMI, you can compare the yields on all of your investments and make a decision based on that information.“Redeem some of your money and make some upfront repayments rather than parking it in low-yielding instruments.Another alternative is to surrender low-yielding items like insurance endowment plans.’s Founder & Director, Aparna Ramachandra, was quoted by ET Wealth as saying.Should you refinance your mortgage?If your interest rate rises, look for banks that offer lower rates than your current lender.If the rate of interest rises,If the rate difference is greater than 50 basis points and the remaining term is greater than 15 years, you can move your loan to take advantage of lower rates provided by other lenders.It should be remembered that switching loans entails a fixed expense.


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