Will home loans, car loans, and other loans become cheaper soon? The meeting of the Reserve Bank of India’s Monetary Policy Committee (MPC) began in Mumbai on September 29.
The outcome of this three-day meeting will be announced on October 1. People are hoping for a big festive season gift from RBI.
If the central bank cuts interest rates on October 1, home loans will become cheaper.
Customers already paying EMIs may see a reduction, while new borrowers could get loans at lower rates. Car loans may also become cheaper during Dhanteras and Diwali.
This year, home and car loans have already become cheaper due to a 1% fall in interest rates.
RBI started lowering the repo rate in February. Since then, the rate has been cut by 100 basis points, or 1%. It has come down from 6.5% to 5.5%.
However, in its last Monetary Policy meeting in August, RBI kept the repo rate unchanged.
Still, because of the 1% cut this year, banks have reduced home loan rates, leading to lower EMIs or shorter loan tenures for customers.
Home loans may get cheaper if RBI cuts the repo rate again on October 1
A repo rate cut now would also help boost economic growth.
But will RBI actually reduce rates on October 1? Economists have mixed views. According to an SBI Research report, the repo rate should be cut by 25 basis points.
The report said that lowering rates would help growth since inflation is expected to stay under control.
Retail inflation could remain at 4% or below in FY27. After the recent GST cut, inflation may drop to 1.1% in October — the lowest since 2004.
RBI could also cut rates in December
According to IDFC First Bank, “There is room to cut rates considering real rates, and growth will benefit more. The GST cut may add 0.6% to GDP growth.
However, US trade tensions could reduce growth by 1%. So, RBI may wait for more clarity after the festive season and could cut rates in December instead.”
All attention will now be on RBI Governor Sanjay Malhotra’s announcement on October 1 at 10 am. He will share monetary policy decisions along with growth and inflation forecasts.
His statement will be important for borrowers and also for stock and bond markets. Hence, it’s wise to wait for October 1 before deciding on a new home or car loan.
