India is currently facing the third bout of COVID infections. While its impact is predicted to be less severe than the previous two waves, it will nonetheless bring an economic slowdown for a couple of quarters.

Due to this slump, RBI is unlikely to raise the interest rates on housing loans for at least six months, making it a great time for homebuyers to invest in their dream home.

However, with the home loan reduced interest rates reaching rock bottom during the first two waves, you may be wondering whether they’ll go down even further during this wave. Before we answer that, let’s understand how the interest rates are decided in the first place.

How are interest rates decided?

In India, the interest rates that banks offer on home loans are directly regulated by the Reserve Bank of India (RBI). To bring any changes to the overall market interest rate, RBI sets a repo rate, which is an interest rate at which both public and private banks can lend money from RBI.

Naturally, the lower the repo rate is, the cheaper it will be for banks to borrow from the RBI. As a result, banks can help themselves forward the borrowed money to the consumers at a lower rate.

RBI usually increases the repo rate to keep inflation in check. However, since many businesses shut down due to lockdowns, the RBI lowered the repo rate significantly (from 6.25% to 4%) in May 2020 to compensate for the ensuing economic depression. And RBI is yet to change the repo rate. This means that interest rates are at an all-time low.

Additional Read – Changes in Home Loan Interest Rates After Coronavirus

Will home loan interest rates go down?

Given that the third wave is significantly less dangerous than the previous two and there are no new lockdowns, it’s unlikely for the economic slump to be as severe or continue as long as those from the previous two waves. In short, there’s no reason for RBI to drop the repo rates further.

Moreover, given the fantastic real estate performance in 2021 and increased supply, the demand for housing loans is currently at its peak. Therefore, lowering the interest rates further may be detrimental for the banks.

Plus, India is currently facing record inflation rates. So, if anything, RBI may increase the repo rates in the coming months rather than reducing it, which will bring up the housing loan interest rates.

In a nutshell, it’s highly improbable for the home loan interest rates to go down any further, even with a third wave.

Additional Read –Why Would 2021 Have a Low Home Loan Interest Rate in India?

Parting thoughts

If you’re waiting for the third wave to bring down interest rates, that’s unlikely to happen. However, you can secure lower-than-average interest rates with Tata Capital’s super affordable housing loans. Apart from the low rates, you also get speedy loan processing and disbursal, flexible repayment tenures, and easy-to-meet eligibility criteria.

Use the home loan EMI calculator on our website to get started with the planning today!

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