In the past two years, home loan borrowers have witnessed more than a 20% spike in their equated monthly installments (EMIs). In this regard, 2024 promises to introduce a more positive outlook. There is expected to be a potential dip of 0-5-1.25% in interest rates.
From May 2022 through February 2023, the Reserve Bank of India (RBI) incrementally raised the repo rate. The apex bank raised the interest rate by 2.5% in this particular time window. This move was initiated in response to escalating global inflation. The rate hikes drove lenders across the board to escalate their interest rates accordingly.
However, with inflation showing signs of cooling off somewhat, the possibility of further hikes seems remote. Several experts anticipate that the central bank could initiate a start of repo rate reductions. This could potentially be as early as the second quarter (Q2) of 2024, with June or July being key months.
At the moment, several factors highlight this prediction of experts. Importantly, the dip in retail inflation is set to act as a catalyst for the central bank’s move towards initiating repo rate cuts.
In addition, the prevailing high-interest rates, which consistently threaten the country’s economic growth, are a few of the developments that could drive the RBI to make a move.
Once the step is taken, experts are of the view that these rate reductions will be responsible for the beginning of a series of cuts, contingent on evolving economic conditions and the central bank’s ongoing assessments.
This would have a direct implication on EMIs. Before this happens, borrowers of home loans will have to tread with patience in the initial half of 2024. Any tangible relief about EMI reductions may materialise around the middle of the year, which will be backed by anticipated adjustments in interest rates.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.