Home Loan Interest Rates Will Fall..!

With the RBI (Reserve Bank of India) signalling a shift in focus - from inflation to growth - interest rates are likely to start coming off from January, 2013.

The repo rate, or the rate at which RBI lends to banks, continues to be at 8 per cent, while the CRR (cash reserve ratio), / or the proportion of deposits a bank is required to park with RBI, is at 4.25 per cent.

The central bank RBI , however, indicated it is now open to easing, setting the tone for its next meeting on January 29, 2013.

“In view of inflation pressures ebbing, monetary policy has to increasingly shift focus & respond to the threats to growth from this point onwards,” the apex bank RBI said.

“Overall, recent inflation patterns & projections provide a basis for reinforcing our October, 2012 guidance about policy easing in the 4th quarter.”

Mr. Subir Gokarn, Deputy Governor, RBI said, “The movement on policy starting with the diesel subsidies & now we have clarity on the FDI policy & other measures taken are all pointing to an overall improvement in the investment climate”

The signal is not lost on bankers, though few intend to move until the RBI actually does, knowing its panache for springing a surprise.

Mr. Rana Kapoor, Founder, MD & CEO, Yes Bank said, “I expect the RBI to ease repo rate by 0.50% between January and March 2013 and by an additional 0.5% to 0.75% through the next financial year (2013-14), which will strongly support growth recovery”

Banks are currently offering housing loans on a par or just 0.25% to 0.5% higher than their base rates, which is about 10 per cent for large lenders at present. A reduction in the key policy rate would compel them to reduce base rates.

As such, most houisng loan products are on floating rates, which are likely to fall going forward. This is why it makes sense to take that home loan now, says experts.

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