This year, the Indian government has extended the reduced risk weight of home loans by one year. When speaking about the conclusion of the RBI’s monetary policy meeting, the Central Bank of India (RBI) announced this respect. According to the Central Bank of India, the initiative intends to enhance credit flow to the real estate industry. This means that credit to the housing industry will continue to flow, despite the fact that banks would have more capital available to distribute housing loans. We have compiled all the takeaways that the government has recently announced regarding home loans to make it easier for you. Keep Reading.
The following are the top five takeaways for the home loan from the RBI’s decision:
Easy access to home loan
RBI Governor has emphasised the benefits of a low-risk weight on personal loans and home loans. Hence this decision will minimize the need for capital injections by banks, and it also guarantees more credit for the borrowers, particularly for high-end homes.
Home loans lending expansion
The governor ensured that Indian banks may lend more to individual house buyers without putting their balance sheets under strain. To put it another way, it would assist lenders with capital sufficiency and enable them to grant additional loans, resulting in a win-win scenario for new borrowers and the housing market.
Impact on EMI home loans
The low home loan rate regime will continue as a result of the RBI’s decision to hold policy rates unchanged, suggesting that borrowers would not have to pay higher monthly EMIs because interest rates at various banks are expected to stay flat.
Property price stability
With the RBI maintaining the status quo on key interest rates and extending the lower weight of house loans for another year, the likelihood of developers passing on growing investment costs to home purchasers has diminished. Builders may not raise home costs due to the RBI’s action, which may boost home buyer confidence. As a result of home property values not growing, new borrowers’ EMI for housing loans is likely to continue at lower levels.
Justification for a fixed interest rate rate
Now the loan rates are at decadal lows, there is a strong possibility that banks will raise rates. As a result, house buyers have the chance to purchase their ideal home at the current lowest interest rate by opting for a home loan rate.
However, most banks do not give a fixed home loan for the full duration of residence but rather for a specific period, say one year to five years, due to home loans’ lowest interest rate plan. New loans customers should choose the fixed interest rate offered by banks since the mortgage rate will either stay the same or rise in the coming quarters. You must even have a good credit score to qualify for home loans.
Now you can be happy if you are thinking of buying a home. Home borrowers can benefit from variable-rate loans with higher interest rates, which means higher EMIs or longer loan terms. However, switching to a fixed rate has both advantages and disadvantages. Hence you must not decide anything in a hurry, take your time and think about the pros and cons before taking a loan. It would be best if you went through the cost-benefit analysis and a thorough review of the industry offers to come to any decision.