In May 2022, soon after geopolitical concerns took centrestage and the Covid threat started abating, the Reserve Bank of India (RBI) increased repo rates for the first time after 31 months to control inflation. Ever since, RBI has been on a rate hike spree, pausing only recently in April 2023, with an indication that this may not be the end of the rate hike cycle yet.
In the last one year, the central bank has raised interest rates by 2.5 per cent or 250 basis points (bps), and repo rates have reached the 6.50 per cent level after four and a half years. The 2.5 per cent number may not look alarming, but it has left a trail of misery for borrowers who have seen equated monthly instalments (EMIS) go up by a huge 20 per cent for a home loan amount of ₹50 lakh over a period of 20 years, at the cost of compromising with other expenses or remaining indebted for a longer period.
The recent policy action by RBI has kindled some hope. The pause in rate hikes in the first bimonthly policy announcement for financial year 2023-24 has given rise to the cautious expectation that EMIs may not go up further, stopping short of being optimistic about a rate cut.
The development throws up key issues for borrowers, both new and existing. The first, of course, is where are the interest rates headed. The second is relevant for new borrowers who may have been waiting for a rate hike pause and would now be wondering if the time is right for them to take the plunge. The third involves existing investors, who need to put a strategy in place if they haven't done so already, especially now that they may not have to realign their cash flows every two months with every RBI monetary policy announcement. Before dealing with those, we take stock of the pain the rate hikes have caused over the past year.
Esta historia es de la edición June 2023 de Outlook Money.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.
Ya eres suscriptor ? Conectar
Esta historia es de la edición June 2023 de Outlook Money.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.
Ya eres suscriptor? Conectar
BUDGET & YOU: NEW REGIME BEATS OLD IN FY26
Lower tax slabs and nil tax on incomes up to 12 lakh has not only provided relief to middle-class families but also rendered the old tax regime irrelevant for most of them. The government also renewed its focus on senior citizens
Consistent Returns In Hybrid Space
The Indian equity market is going through rough waters, leaving investors uncertain about whether to choose equity or fixed-income investments. Experts, meanwhile, predict higher volatility and recommend a safer approach.
BEHIND THE MIND GAMES THAT END IN 'DIGITAL ARREST'
The new scam of digital arrest employs psychological pressure to dupe vulnerable victims, who go through a phase of trauma and fear. We tell you how it works, whether the government is doing enough to curb the menace, and how you can keep yourself safe
Boost To Consumption, But Don't Buy Blindly
With the budget putting more money into the hands of people to boost consumption and increasing foreign direct investment in insurance, certain consumer-oriented sectors, such as FMCG, auto, as well as manufacturing are expected to do well, but think before investing
Pre-Existing Diseases In Insurance
Understanding pre-existing diseases (PEDS) in health insurance is crucial because they can affect your coverage and premiums. Pre-existing conditions, such as diabetes or heart disease, are health issues you may already have and know of before purchasing insurance.
'Govts Are Often Influenced By Private Interests, And Don't Focus On Health'
Longevity is not about going to the gym or having superfoods, but living in an environment that promotes a healthy lifestyle. Dan Buettner, the Blue Zones founder, National Geographic fellow, best-selling author and the producer of the Emmy Award-winning 'Live to 100: Secrets of the Blue Zone' series, learnt this during his decades-long research into five blue zones of the world. In an interview with Nidhi Sinha, Editor, Outlook Money, as part of the Wealth Wizards series, he talks about another kind of wealth, a healthy and fulfilling long life. He also talks about blue zones, and how policy matters when it comes to improving the health, lifestyle and longevity of the population
The 'Gap' In Long-Term Returns
There is a significant gap in the nominal and inflation-adjusted returns across asset classes. So, reading long-term trends is important before making investing decisions
Changed Jobs? Where is Your EPF Money?
For many employees, transfer of EPF becomes a nightmare when changing jobs. We give you the likely problem scenarios and what you should do for a seamless transfer of your EPF upon changing jobs and states
Old-New Break-Even Point Is High
The break-even point for deductions to choose between the old and new tax regimes has increased to ₹8.50 lakh for income of ₹24.75 lakh and above. Normally, deductions and exemptions commonly claimed by salaried individuals do not exceed ₹8.50 lakh
How Not To Be Financially Vulnerable
We often naïvely assume that our monthly pay cheques will cover whatever life throws our way. But it may not cover all our emergencies, which is why we need to create a safety net
