Home Loan Customers ATTENTION! Here Is Your Strategy To Beat Rising Interest Rates

The RBI on Wednesday increased the repo rate by 40 basis points to 4.4 per cent. The EMIs on home loans will soon get costlier. india.com answers what you can do to protect yourself from interest rate hikes.

Written by: India.com Business Desk Edited by: Raghav Aggarwal

Updated: May 5, 2022, 2:43 PM IST

https://www.india.com/business/home-loan-buyers-tips-to-beat-rising-home-loan-interest-money-tips-post-rbi-interest-hikes-loan-rates-5375353/

What should home loan customers do to tackle the rising interest rates?

New Delhi: Owing to rising inflation in India, the Reserve Bank of India (RBI) announced a repo rate hike by 40 basis points to 4.4 per cent on Wednesday. The announcement was made by RBI Governor Shaktikanta Das at 2 PM and by 3 PM, the share markets had fallen over 1,000 points. Along with the repo rate, the Cash Reserve Ratio (CRR) was also hiked by 50 basis points to 4.5 per cent.

But that’s not all. According to reports, the RBI is likely to raise the repo rate further in the coming months. A report by Indian Express states that there may be chances that the RBI hikes the rates by 150-200 basis points this year alone. This would put huge pressure on the pockets of the households that have taken home loans. The EMIs are expected to go significantly higher.

The immediate impact of the repo rate hike by the RBI Governor will be a rise in interest rates charged by the banks. If the home loan rates go up from 7 per cent to 9 per cent (a hike of 200 basis points), the EMI on a loan of Rs 50 lakh for 15 years will rise by Rs 5,772 per month. With incomes declining due to Covid-19, this will put a big dent in the savings of the households.

5 Things You Can Do To Save Your Hard Earned Money

Currently, as the Fixed Deposit (FD) rates are low and in the range of 3.1 per cent to 4.1 per cent, the home loan customers can pre-pay a part of their loans out of their FDs.

Also, as the rates are expected to remain lower in near future, the customers can also raise their EMIs for the next 12-18 months to lower the impact of rate hikes.

As the return on FDs is relatively low as compared to current inflation levels, people can go for more short term investment options (PPF etc.) rather than long term ones.

The share market is giving good returns to investors. With proper guidance and research, markets can become an attractive place for investment. The return has to be more than 7 per cent, to beat the inflation. According to experts, a fall in the share market must be seen as an opportunity to buy more shares.

Investors must also diversify their portfolios by including more equity instruments and mutual funds as it would lead to better tax management.