With interest rates north bound, there appears no magic formula that can save the borrowers from rising EMIs and stretching repayment tenures. In the April credit policy, the Reserve Bank reduced risk weightage on home loans below Rs 20 lakh and hoped that banks will pass on the benefits to customers. But some major banks like ICICI still went ahead and hiked their home loans by 1 percent.

On an average, a 1 percent hike in the interest rate brings down the loan eligibility (per lakh) by around 7 percent. So what should a home loan borrower do?

Well, if you are a prospective home loan borrower, analysts recommend a ‘wait and watch’ approach for now. “Capital inflow is continuing unabated. Due to speculation, real estate prices may see more appreciation and inflation is yet to be in RBI’s comfort zone. Considering all this, it would not be totally wrong to say that an another hike in interest rates is imminent,” reasons Sunil Sinha, head & senior economist, CRISIL.

Home loan consultant Harsh Roongta expects another hike but thinks it will not be drastic. “The regulator is sensitive to borrowers who opt for loans below Rs 20 lakh as they constitute 90 percent of the market. But I doubt how much it will benefit them. In terms of availability definitely but not rate wise,” says Roongta.

“For a new borrower I’ll always recommend a fixed rate. The loan generally spreads around for 15-20 years and interest rates keep on changing. A fixed rate makes sure that you’ll not be affected by those eccentric trend changes,” feels Kapil Wadhawan, managing director, Deewan Housing Finance.
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