Will the RBI relent this time around in the monetary policy and help in the reduction of interest rates on housing loans? A look by BALAJI RAO

The new year has begun positively with the rupee gaining over the dollar, equity markets turning buoyant with the Sensex regaining 20,000 points and more importantly, inflation rates coming down to 7.24 per cent.

Again all eyes are focussed on the RBI Governor who is set to announce the monetary policy on January 29. Usually a biannual policy announcement that has now become almost a bimonthly affair, thanks to the unrelenting inflation that has affected the growth prospects of the economy over the last two years.

The industry is expecting that the RBI would finally start taking a favourable stance on the key interest rates by beginning to reduce them and looks like the inflation rate has tamed quite a bit since the last couple of months.

The reduction in interest rates is going to be good news not only for the country’s growth prospects but also to the home loan borrowers – existing as well as new borrowers.

While this will boost the real estate sector which has been waiting to accelerate into the next level of growth, it additionally works as positive news for new home-buyers who have been circumspect whether to book their flats and get loans at the given rates or wait for the softening of the rates. A slew of offers has already been announced by many banks and housing financial institutions and as reported by these lenders, the off-take of loans has improved ever since.

A 50 basis points cut or 0.50 per cent reduction in the key interest rates will definitely help the borrowers and this step would further offer hope on more such easing of rates in the months to come.

Hoping that the RBI would indeed consider reducing the rates in this forthcoming policy announcement, prudence says that floating rate still works as the best option and until the lending rates do not come down to as much as eight per cent it would be ideal not to opt for fixed rates.

Aspiring borrowers can look for the best offers available in the market and lock the offered rates in the coming weeks because the worst of inflation is not yet over and the RBI is still not sure about how it can sustain rate cuts on a continuous basis in the coming months.

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