Amidst high liquidity in the system, the Reserve Bank of India’s policy review on Tuesday with no change in rates came as a breather for millions of home loan customers, but that does not seem to be there for long as the central bank is set to exit from the accommodative policy stance and get aggressive.
“The following measures (increase in SLR and other steps) constitute the first phase of exit,” said RBI Governor D Subbarao.
Market experts feel that an increase in the statutory liquidity ratio (SLR) and increase in provisioning (from 0.4 per cent to 1 per cent) by banks for commercial real estate sector lending are moves that indicate the beginning of an end of low rate regime.
“I think, post January, the interest rates will start to rise but it would not be a steep one,” said Keki Mistry, vice chairman and managing director, HDFC.
Others in the industry too maintain the same line.
“I think there is a possibility of hardening of policy rates in January and if there is a hike in policy rates then, there is a likelihood of a rise in the loan rates,” said RR Nair, CEO, LIC Housing Finance. “I do not see any rise of rates till December.”
RBI too is hinting on a tighter interest rate regime going forward.
“This may be the last policy where the rates have been kept unchanged and we may see tightening of rates in the next policy review,” said Aseem Dhru, CEO, HDFC Securities.
If that happens then the interest rates on home loan rates that have come down to around 9 per cent for Rs 20 lakh loan will see an upward revision.
The news of an expected rise in interest rates in the near future is a concern for the home loan seekers and floating rate loan holders.
“There is hardly that one can do about the interest rate cycle and it does not make sense to opt for a fixed rate loan that is around 2 percentage point high,” said Surya Bhatia, a Delhi-based financial planner.
“One can look to be conservative on the loan amount and keep some cushion for any additional outflow on account of any rise in rates.”