Why Home Loan EMIs Are Unlikely To Ease Soon

The war against inflation isn't over. is highly unlikely that RBI will cut interest rates in August

- Vivek Kaul

I never thought the last days of my youth would be spent worrying about a home loan," said Rahul, days before he entered his mid-thirties.

"You turn 36, my dear," his wife Pooja, who had taken a break to complete her PhD in economics, replied. "I didn't know 36 was young these days."

"Well, the trouble with youth is that one assumes it will continue forever," replied Rahul.

"True that."

"Jokes apart," said Rahul, "the home loan EMI is really stretching us. After paying the EMI, we aren't saving much."

"I know that yaar," replied Pooja. "I handle the personal finance part of our relationship."

"I remember reading a few days back that the retail inflation in June was 4.8%."

"Yes."

"Isn't it lower than where it was during the last financial year?"

"Yes. The inflation averaged 6.7% in 2022-23."

"So, why haven't home loan interest rates come down?" asked Rahul.

"As in?"

"Inflation is down, so, shouldn't interest rates come down as well."

"I wish it was as simple as that," replied Pooja. "That's the problem with being a mechanical engineer...you think everything can be nailed down to a simple formula," she added.

"Don't take potshots at my degree," said a slightly embarrassed Rahul. "Explain properly."

"Yes, inflation in June was at 4.8% against 6.7% last year. But it is still higher than the Reserve Bank of India (RBI)'s target of 4%."

"Oh. I didn't know that."

"Also, inflation in June was higher than inflation in May."

"Really?" asked Rahul. "I didn't know that either."