1. Home loans linked to external benchmark
Those who have a link to the Home Loan External Benchmark, there is no possibility of any change in their EMI at the moment. However, banks can decide to reduce margins on their behalf. On the other hand, if the bank increases the risk premium on your account, the EMI can increase on the amount of the home loan.
2. Loans linked to MCLR
The bank’s marginal cost of funds based lending rate (MCLR) is also affected by cost of funds such as internal factor and external factor like repo rate. Usually, the reset period of home loan linked to MCLR is 6 months or one year. In such a situation, if your bank reduces it by revising MCLR in the coming time, your EMI will also be reduced. In September 2020, RBI had told through its Twitter handle that it has reduced the reset period of MCLR from 1 year to 6 months. This means that any change in the policy will affect the customers soon.
Also read: Relief from inflation: RBI estimates, prices of vegetables will remain soft
3. Link Loan to Base Rate or BPLR
Those whose loan is linked to base rate or benchmark prime lending rate should consider linking to external benchmark. Any change in policy by RBI has an impact on it. At least the financial planners and industry experts have said this. With effect from December 10, 2020, SBI’s BPLR is 12.05 percent and base rate is 7.30 percent. However, the interest rate for repo rate linked loans starts at 7 percent.
4. Perfect opportunity to get a new home loan
If a person is preparing to take a loan in the near future, then this is the best time for them because the interest rates are very low. However, other types of factors should also be evaluated amidst the current epidemic. Apart from this, to get a loan at the lowest rate, the margins of banks and their risk premium should also be known. You also have to note that not all banks have chosen repo rate as an external benchmark. Interest rates of some bank loans have been linked to deposit rate certificates, treasury bills etc. Before taking a new loan, it is important to know that the external benchmark linked interest rate fluctuations remain. Any change in interest rates will affect EMI.
Also read: No change in policy interest rates, 10.5% growth forecast for next financial year
If a person is eligible then he can apply for loan through Pradhan Mantri Awas Yojana (PMAY). It is a credit linked subsidy scheme for people earning Rs 6 to 12 lakhs per annum, who get 4 percent subsidy on interest. For those earning Rs 12 to 18 lakhs per annum, this subsidy is 3 per cent. The last date for availing this scheme is 31 March 2021.