Home, consumer loan EMIs set to rise again
July 30, 2008
New Delhi:
With inflation remaining at double-digit levels for six weeks running,
RBI decided on Tuesday to further tighten its monetary policy. The
measures will squeeze liquidity and push interest rates upwards
— for you it means EMIs on loans, whether for housing, car
or other purposes, are likely to get still higher. The move is also
likely to hit demand in the economy, which could dampen the growth
momentum.
The central bank has increased the rate at which it lends short-term
funds to banks — the repo rate — by half a percentage
point and the proportion of deposits the banks have to set aside
in cash — the cash reserve ratio (CRR) — by 0.25 percentage
points.
A half percentage point increase in housing, car and personal loan
interest rates seems on the cards. This would be the third time
in 2008 that rates have been moved up and the second time in this
month. Earlier this month, banks had increased lending rates by
0.5 to 0.75 percentage points.
In 2008, interest rates on home
loans have already gone up by around one percentage point. Include
the rise in the interest rate due to Tuesday’s measure and
the total hike will be 1.5 percentage points. On a 20-year loan
of Rs 50 lakh that translates into an increase in EMI of over Rs
5,250.
In fact, the interest rate on home loan has gone up by almost 75%
from 7% in 2004 to 12.5% at present. This sharp hike in interest
rates by 5.5% has led to increase in the EMI by around 50% over
these last four years, causing a huge burden for the salaried middle
class.
Source: The Times of India
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