The repo rate determines the rate at which commercial banks can obtain loans from the Reserve Bank of India. It accelerates the economy and keeps inflation in check. RBI revises or keeps rates stable to stabilize the prevailing inflation. It plays a pivotal role in stimulating the economic growth of the country. The repo rate determines how much interest you will pay or receive. If the repo rate is high, you will pay more interest on your loans, credit cards, and overdrafts. Whereas if it is low, then you will pay less interest. In the case of the housing sector, lower repo rates will enhance housing demand. The lower borrowing rates will encourage homebuyers to purchase homes owing to affordability.
Recently, the apex bank confirmed to keep the repo rate stable for six consecutive times. Since the Q1 of 2023, the rates remained stable at 6.50%. Homeownership remains a prominent aspiration for numerous individuals. To attain this aspiration, getting a home loan becomes an inevitable aspect. The acquired home loan is meant to assist homebuyers financially. Thus, getting it at a suitable interest rate is vital. Several macroeconomic factors influence home loan interest rates. Among them, the repo rate is the key influencing factor. The stable repo rate will play a substantial role in stimulating the housing demand and sales in key markets and micro-markets in the country.
The consistency in the repo rate has instilled stability and confidence in the housing market. As the rate is low, commercial banks are prompted to lower their interest rates on home loans. Further, homebuyers can lock in their suitable interest rate while the repo rate is stable. Homebuyers can save big on their home loans and attain the dream of homeownership more reliably. This increases affordability in real estate, motivating investors to dive and explore the market. With increased transparency and accountability in the sector, homebuyers can choose from many housing options while developers plan for new launches. The continuing resilience of the realty market amid uncertainties will lead to healthier competition, encourage developers towards new markets, and assure homebuyers of the best-suited options.
Considering this, homebuyers must be well-informed regarding the updated economic conditions and RBI’s policy announcements. As the repo rate is bound to fluctuate frequently, homebuyers must be broadly updated about the economy during that specific time while opting for a home loan. They must thoroughly research and strategize their financial plans, whether opting for a fixed or variable interest rate on home loans. Understanding their differences and benefits is necessary before finalizing. The fixed rate gives you stability at a constant rate, irrespective of any economic fluctuations. Whereas the variable rate periodically changes as per the economic changes. Homebuyers aspiring to purchase a home should understand the incredible relationship between the repo rate and the housing sector.
