Stock Market

Mortgages set to pinch as rates rise

   Download Android App    Share in      FullScreen   CheckVideos

MUMBAI: Rising interest rate is set to pinch retail borrowers harder as equated monthly installments (EMI) will remain elevated or rise further for the rest of the fiscal year till March 2019. Earlier this month, large retail lenders such as State Bank of India (SBI), HDFC Bank, ICICI Bank, Bank of Baroda and Union Bank of India hiked their benchmark marginal cost based lending rate (MCLR) by 5 to 20 basis points each.

One basis point is 0.01 percentage point. Private bank HDFC Bank and stateowned SBI both hiked their MCLR by a steep 20 bps across the board. SBI’s one-year MCLR, which is linked to its home loan rate, is now quoting at 8.45 per cent up from 8.25 per cent before the latest increase.

It has now increased by 50 bps since March this year from a low of 7.95 per cent. Higher rates mean borrowers will have to shell out more on their loans and mortgages every month. For example, the SBI’s 50 bps increase since March means that home loan borrowers now have to shell out an extra Rupees 1,500 per month or Rupees 18,000 per year on a Rupees 50-lakh loan for a ten-year tenure. “The rate cycle has turned without a doubt and there is now no question of rates doing down.

Retail customers should expect their EMIs to remain elevated or go further up from here,” said Rajeev Anand, executive director, retail banking, Axis Bank. Strong economic growth indicating higher demand, and worries over inflation, mainly due to higher crude oil prices are likely to keep interest rates elevated. Concerns about the depreciating currency have seen some analysts expecting a faster rate increase by the Reserve Bank of India (RBI). “We believe that the combination of a widening current account deficit (CAD) and external funding stress warrants policy action We expect a 50 bps hike in the repo rate in the fourth quarter 2018 (up from the earlier 25 bps), taking it to 7 per cent,” said Pranjul Bhandari, chief India economist at HSBC. The RBI governor has been steadfast in his single-minded focus to keep consumer price inflation around 4 per cent. Figures released earlier this month showed that consumer inflation had eased to 3.69 per cent in August, below the RBI target. However, worries over a widening current account deficit has kept money markets under pressure and led to the rupee falling to all-time lows. Bankers say money availability has tightened as indicated by the rise in the benchmark 10-year bond yield which has risen 100 bps from 7.12 per cent in April to 8.12 per cent now.

In other words, borrowing rates are unlikely to come down in a hurry.




Unlimited Portal Access + Monthly Magazine - 12 issues-Publication from Jan 2021

Buy Our Merchandise (Peace Series)

 

Contribute US to Start Broadcasting


It's Voluntary! Take care of your Family, Friends and People around You First and later think about us. Its Fine if you dont wish to contribute and if you wish to contribute then think about the Homeless first and Feed them. We can survive with your wishes too :-). You can Buy our Merchandise too which are of the finest quality.

Debit/Credit/UPI

UPI/Debit/Credit

Paytm

STRIPE

Details
Category: Stock Market


21