WILL YOUR HOME LOAN EMI FALL DUE TO RATE CUT? SAN­JAY KU­MAR SINGH

New bor­row­ers will ben­e­fit if banks cut their MCLR. Older bor­row­ers’ EMIs will change only when their re­set date ar­rives

Business Standard - - PERSONAL FINANCE -

■ Af­ter RBI’s 25-ba­sis-point (bps) rate cut, home loan rates are ex­pected to come down, but with a lag

■ Many banks have al­ready fixed their mar­ginal cost of funds based lend­ing rates (MCLR) for the month, so they may only re­vise them in March, un­less the big­ger play­ers like SBI re­duce rates in Fe­bru­ary, forc­ing oth­ers to fol­low suit

■ New bor­row­ers will ben­e­fit if banks re­vise their MCLR

■ Old bor­row­ers will see a change in equated monthly in­stal­ment (EMI) only when their re­set date ar­rives

■ Sup­pose some­one is on the one-year MCLR. His bank may cut the MCLR. Nonethe­less, his EMI may not fall be­cause the postre­duc­tion MCLR may be higher than last year’s level

■ Hous­ing fi­nance com­pa­nies are un­der pres­sure and their cost of funds has risen. Those in good fi­nan­cial health may pass on the ben­e­fit of the rate cut. Those that are not may keep their rates un­changed, or may cut par­tially

■ Com­pare your cur­rent home loan rate with the best rates avail­able

■ If there is a gap of 25-50 bps, and you have a con­sid­er­able ten­ure left, you are likely to ben­e­fit from switch­ing

■ If you lock into the best rates now (linked to the oneyear MCLR linked rate), you will be safe for one year

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