With the recent rise in repo rates and MCLR, many fear its direct impact on the housing Loan Rates. It was a mystery that has now been resolved.
PNB Housing Loan Rates are known to be low and affordable. Read on to understand how the recent hike in Repo rate/MCLR has affected it.
Let us understand what exactly is happening in the market.
Lately, some banks had expected repo rates to rise. With an increase in MCLR (marginal cost of fund-based lending rates), the Reserve Bank of India skyrocketed the repo rates by 40 points to 4.40%.
The bank’s loans are now linked to MCLR, which were permitted between April of the year 2016 and 2019 – October. Loans granted after October 2019 were linked to the Repo rate. Banks are not allowed to grant loans below the MLCR benchmark rate. MCLR Comparison and home loan interest rates move together.
For example, consider a variable rate mortgage acquired on January 1, 2020. The percentages were split for 9% on MCLR. The mortgage interest was therefore 10% (9 + 1) percent every year.
A year later, if the MCLR rises to 10%, the latest rates of interest starting from January 1, 2021, assuming a repetition of 1 year, would be 11% (10 + 1%).
In the same way, the repo rate is the borrowing rate at which the Reserve Bank of India gives funds to commercial banks. If the Repo rates rise, bank lending rates and loan prices will also rise. If there is a reduction in the repo rate, it means loans at a more competitive price for borrowers.
The Effect on Housing Loans
However, the effect of both has been insignificant on home loans
The PNB Housing Loan Rates benchmark is at its high-time low level. Even as interest rates rise by 100 points this year, PNB Housing Loan Rates may be lower than in 2019. A layperson will still find it affordable to apply for Home loans after comparing interest rates and settling for the least available interest rates.
The rates of Home loans are cyclical. So, if you can’t get a housing loan now, you must prepare for the next opportunity.
Improve your prepayment ability, enhance your CIBIL score, keep your necessary documents and financial statements handy, and be ready to apply at the right time. You can use a home loan EMI calculator to calculate the interest.
Role of The Government
Also, if demand for real estate is hit hard, the central/state Government will announce some regulatory measures (subsidies, housing loan incentives, stamp duty reductions, etc.) The Government supports the demand for housing which offers new opportunities to potential borrowers.
The focus remains on affordable housing and will benefit people wishing to purchase property in the country. The last six months of 2021 were a great opportunity to invest in PNB Housing Loan Rates because of Government initiatives like Pradhan Mantri Awas Yojana Scheme (PMAY), measures taken at the state level, the Credit Link Support Scheme, and lower rates of interest.
Measures such as the reduction of the stamp duty. With the withdrawal of many pandemic measures, the Government enters the cycle of raising interest rates but still focuses on its mission of “Housing for All.”
Taxation Benefits on Housing Loans Remain
A home loan borrower may also apply for a housing loan interest deduction benefit under section 24 (b) of the Income Tax Act. As you repay the principal part of the home loan, IT Law 80C is subject to a threshold of Rs. 1.5 lakh rupees.
The bottom line is that such deviations, increases, or decreases in bank interest rates have a negligible effect on PNB Housing loan rates. It would be best if you looked out for seasonal offers, the best phase to apply for a housing loan so that you crack the best deal.
It is a myth that bank rates have highly increased the PNB Housing home loan prices, and it is a misconception that the right time to apply for a housing loan is a few years from now. The present scenario is conducive enough to apply for decent PNB Housing rates of home loans. The Government is always in favor of home loans, and there should be no major deviation in the home loan rates.
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