As widely expected, the Reserve Bank of India (RBI)-led Monetary Policy Committee (MPC) maintained the repo rate at 6.5 percent on Friday, given concerns about inflation. It is the seventh consecutive time that the central bank committee has kept the key lending rate unchanged. The repo rate, the rate at which the RBI lends to banks, remains a crucial parameter in this context.

RBI Governor Shaktikanta Das has consistently underscored the central bank’s commitment to steering inflation towards the 4 percent target. Despite February witnessing volatile food inflation, core inflation, excluding food and fuel, has exhibited a downward trajectory. However, concerns persist regarding the potential impact of weather fluctuations on inflation and economic stability.

Finance Minister Nirmala Sitharaman has indicated robust economic performance, with GDP growth exceeding 8 per cent in the first three quarters of FY24. This trend is anticipated to persist, leading some experts to predict an upward revision in the RBI’s growth projection for FY25.

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From homebuyers’ perspective, this is good news as the move ensures that homebuyers’ equated monthly instillments (EMIs) remain stable. This provides homebuyers with another opportunity to make cost-optimised home purchases decisions. With housing prices escalating across the top seven cities over the last year, unchanged home loan rates offer some relief to homebuyers. This is anticipated to lead to a decrease in home loan interest rates, enhancing affordability and boosting the market with an expected increase in sales.

Additionally, given the current trends, the housing market is experiencing a bullish trend, and unchanged home loan rates are expected to further enhance overall positive consumer sentiments.

Adhil Shetty, CEO, Bankbazaar.com, said, “Reduced home loan interest rates create an atmosphere of optimism among potential homebuyers, instilling confidence and enthusiasm in their pursuit of home ownership. Lower interest rates translate into more manageable monthly mortgage payments, thereby enhancing affordability for individuals seeking to invest in residential properties. This increased affordability not only expands the pool of potential buyers but also encourages existing homeowners to consider upgrading or repaying their home loans.”

Atul Monga, CEO & Co-founder, BASIC Home Loan, said, “The RBI’s decision to maintain the repo rate at 6.5% is crucial. This steady rate offers stability and predictability for borrowers, indicating that the cost of borrowing for housing remains unchanged for now. It provides assurance to prospective homeowners, allowing them to plan their finances effectively without worrying about sudden fluctuations in interest rates. However, while the steady rate offers short-term relief, borrowers should remain vigilant about long-term trends and economic indicators. They should assess their financial capabilities and explore opportunities to secure favorable loan terms amidst this rate environment.”

What should home buyers do?

When the repo rate remains unchanged, both existing and new home buyers can take several steps to make the most out of the current situation:

Review Existing Loans

Existing home buyers should review their current home loan terms and assess whether there are opportunities to refinance at more favourable rates. Contacting their lender to inquire about any potential benefits or options available due to unchanged repo rates is advisable.

Compare Loan Offers

New home buyers should thoroughly compare loan offers from different lenders to ensure they secure the most competitive rates and favourable terms. With the repo rate unchanged, they can still negotiate with lenders for better deals based on their creditworthiness and financial situation.

Fixed vs. Floating Rates

Home buyers should evaluate whether fixed or floating interest rates suit their needs better. Fixed rates provide stability and protection against potential rate hikes in the future, while floating rates may offer lower initial rates but are subject to market fluctuations.

Plan for Affordability

Both existing and new home buyers should carefully assess their affordability considering unchanged repo rates. They should ensure that their monthly mortgage payments align with their budget and long-term financial goals to avoid any financial strain.

Stay Informed

It’s essential for home buyers to stay updated on economic indicators and market trends that may influence future rate decisions by the RBI. This knowledge can help them make timely decisions regarding their home loans.

By taking these proactive steps, both existing and new home buyers can navigate the unchanged repo rate environment effectively and make informed decisions regarding their home loans.