The middle class will be hit the hardest as home car loans become more expensive ahead of Diwali. How you should expect to pay more

RBI Monetary Policy: At a time when inflation has taken a toll on middle-class family households, the Reserve Bank of India (RBI) escalated its troubles by raising the repo rate by 50 basis points to 5.90%. Rising prices for everything from cars to cooking oils are changing the way middle-class families consume goods. Recently, a survey conducted by the Bank of Baroda revealed that there has been a drastic drop in the production of everyday items like soap, toothbrush, biscuits, etc., as the families of the middle class are opting for smaller packaging and postponing product purchases in the wake of inflation.Also Read – Bad News for ICICI Home Loan Customers, Bank Raises Interest Rates

Meanwhile, with the repo rate rising, existing borrowers and new borrowers will have to pay higher equivalent monthly payments (EMI) for their home loans, as the cost of borrowing will rise for banks. In addition, car loans will also increase, but those who have taken out a fixed interest rate loan will be spared. Read also – RBI monetary policy: Governor Shaktikanta Das raises repo rate by 50 bps and sees inflation at 6.7% – Watch the video

What is the pension rate?

The repo rate is the interest rate at which the RBI lends short-term funds to banks. The RBI’s decision to raise the repo rate again will force all banks to raise interest rates on loans. As a result, home loans and auto loans are expected to become more expensive. Also read – Credit and debit card users alert! RBI will make a BIG decision tomorrow. Details here

How will the repo rate affect your EMIs?

For the uninitiated, banks will have to set interest rates for different types of customers based on the MCLR (marginal cost of funds based lending rate). Taking into account the repo rate and other lending rates, banks revise the MCLR on a monthly basis.

Five reference rates are required for different durations ranging from 1 day to 1 year. Banks are free to set rates for terms longer than 1 year. Banks cannot lend below MCLR, but there are some exceptions. For deposit loans and loans to employees of the relevant bank, banks can lend below the MCLR.