HDFC Bank has reduced its MCLR, which could reduce EMIs for home loans linked to the MCLR. However, the relief will depend on the loan's reset date, interest rate, and outstanding balance. Customers should check the bank's new rate.
HDFC Bank takes a big decision as the repo rate hike increases; know what the impact will be on customers.
Home loan EMIs are a huge burden every month. In such a situation, even a small change in interest rates can make a significant difference for millions of borrowers. Today, the RBI raised the repo rate. Meanwhile, HDFC Bank's MCLR rate changes are expected to provide some relief to some borrowers. However, not every borrower will immediately benefit from this.
HDFC Bank has revised its Marginal Cost of Funds Based Lending Rate (MCLR). MCLR is the benchmark rate against which loan interest rates are determined. Therefore, for customers whose loans are linked to MCLR, this rate reduction may impact interest and EMIs.
However, the actual reduction in EMI will depend on the MCLR period the customer's loan is linked to and when the next reset is due. This means that even with a rate reduction, the change in EMI may not be immediately visible.
What changed after RBI increased the repo rate?
Meanwhile, the Reserve Bank of India announced its monetary policy decision on October 7th, raising the repo rate by 25 basis points. This has resulted in an increase from 5.25 percent to 5.50 percent. The repo rate increase is particularly likely to impact customers with floating-rate loans linked to external benchmarks. The impact on interest rates and EMIs for such loans may be felt relatively quickly.
Which customers can get relief?
Customers with older floating-rate loans linked to the MCLR may benefit from the bank's rate cut. However, a significant portion of new home loans are linked to an external benchmark or the repo rate. Therefore, a reduction in MCLR alone will not reduce EMIs for every home loan borrower.
Before reducing EMI, understand this.
If your loan is linked to MCLR, your interest rate may change after the bank's new rate is implemented. However, the amount of EMI reduction will depend on the outstanding loan amount, remaining term, current interest rate, and reset date. Therefore, it is not correct to expect a significant reduction in EMI based solely on the change in MCLR. Borrowers should check their loan agreement and the next reset date.
