Home loan can become cheaper in the new year, this way your EMI can be reduced

If you are also troubled by the burden of increased EMI due to home loan, then this year is going to be a year of happiness for you. Because this year we may see a reduction in EMI. Let us know.

For home loan borrowers, 2022-23 has been a year during which there has been no reduction in the EMI burden falling on them. Home loan EMIs have typically seen an increase of more than 20% in the last two years. However, 2024 has brought new hope and there is a possibility of interest rate cut by 0.5% to 1.25%. There are many reasons which indicate that a cut in interest rates may be seen this time. Let us try to understand about it.

What is the reason?

Due to rising global inflation, RBI has continuously increased the repo rate from May 2022 to February 2023. Due to which all the loan takers have been forced to increase their interest. Although inflation has come down to a great extent since then, the central bank has not reduced interest rates since then. In such a situation, it is being estimated that the bank may take this decision in the next Monetary Committee meeting.

This will be the effect of reducing repo rate

When the central bank changes its repo rate, it will affect not only home loan takers but also car loan and other loan takers. The Reserve Bank of India (RBI) has a powerful tool called 'repo rate' and it is an important way to deal with inflation. When inflation is very high, RBI tries to reduce money flow in the economy by increasing the repo rate. When the repo rate is high, the loans that banks get from RBI become expensive, due to which banks make loans expensive for their customers. This reduces money flow in the economy. Due to reduced money flow, demand reduces and inflation reduces. Similarly, when the economy slows down, recovery requires increasing money flow.