Repo rate always plays a crucial role in home buying; it has a great impact on purchasing or taking home loans through EMI. And the repo rate changes every year, as per reports from the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on October 8, 2021 reduced repo rate at 4% respectively to add liquidity in the country’s economy.
Does it mean to homebuyers?
Repo rate has always a significant impact on your financials, and it is always essential to know that how it should impact your home loan liability. So, to get better clarity on it let’s understand it briefly.
Let’s add some extra knowledge about it
It’s the interest rate at which the Reserve Bank of India lends money to various banks. Here, the term repo is short for “repurchasing option” or you can say “repurchase agreement”. In this agreement commercial banks provide securities such as treasury bills or gold to the RBI for availing of overnight credit in case of a liquidity shortfall.
Reverse repo rate
Reverse repo rate is another tool used by the RBI where it borrows money from banks. To maintain desired inflation levels RBI uses reverse repo rate. So the add-on is, by increasing interest, the RBI encourages banks to lend money to the RBI, which result in it reduces excess liquidity from the system.
Current Repo Rate & Reverse Repo rates
At present, according to the RBI Repo Rate is 4 % and Reverse Repo Rate is 3.35%.
Difference between repo rate and reverse repo rate
|Repo rate||Reverse Repo Rate|
|Here interest rate charges by RBI to lend credit.||In Reverse Repo Rate RBI pays the interest on borrowings.|
|Repo Rate is always higher than the reverse repo rate.||Reverse Repo Rate is always lower than the repo rate.|
|It’s a tool used by RBI that can control inflation.||The best tool that can maintain the cash flow.|
|It works as per the repurchase agreement.||It can work as per the repurchase agreement.|
How does change in repo rate impact home loans?
When the RBI lowers the repo rate, the cost of the borrowing for banks goes down hence banks are expected to pass the benefits to the consumers. Considering the Coronavirus outbreak and its adverse impact on the economy and the consumer demand the banking has brought the repo rate down to 4% So that they can grab the best opportunity on this.
And now, banks have started lowering home loan interest rates to support consumers. State Bank of India (the Country’s largest bank) recently reduced its repo rate-linked home loan interest to a record low of 6.95%.
If you are also considering buying your dream home then this is the right time to include it in your rest to-do list. Whether it is an affordable or premium property, in both of the cases, you will get lower home loan assistance from the banks.
Among all, these advantages you can consider a home by a reputed developer for instance Tata Primanti Gurgaon by the reputed developer Tata Housing.