The Bank of Baroda is raising interest rates on home loans: click here for details

A day after the Reserve Bank of India (RBI) raised the repo rate and the rate on deposits held on deposit by 50 basis points (100 basis points = 1%), many banks hiked their rates on home loans. One of the banks that has migrated is . According to the bank’s website, the Baroda Repo Linked Lending Rate (BRLLR) was increased effective August 6, 2022. For retail loans, the BRLLR is 7.95%. According to the bank’s website, the BRLLR is composed of the current RBI repo rate, ie 5.40%, and a premium/basis spread of 2.55%.

A risk premium is also added to the BRLLR to calculate the home interest rate. According to the bank’s website, a risk premium of 1.35% is added for employees. The risk premium depends on various factors such as the CIBIL score, job profile, loan amount, etc. The effective interest rate is between 7.95% and 9.30%. If an individual is a self-employed individual or non-employee customer, an additional 0.10% will be charged. For employees of the bank, the effective interest rate is 7.95%, ie BRLLR.

How will this affect you?

If the Bank of Baroda raises interest rates, your home loan EMIs will rise. For individuals whose EMI has yet to be deducted from their bank account, the bank will recalculate the EMI before any deduction is made.

It’s important to note that the new EMI calculation is based on the outstanding principal amount and not the loan amount borrowed.

The EMI you pay has two components – principal and interest. As the number of EMIs paid increases, the amount of principal repaid increases and the interest paid decreases.

Why did the RBI raise the repo rate?

Since the start of the fiscal year, the central bank has now increased the repo rate three times, including an unscheduled announcement in May 2022. The RBI increased the repo rate by 40 basis points in May. On the other hand, the RBI raised the repo rate by 50 basis points each time in its policy reviews in June and August. The central bank is on a rate hike spree due to rising inflation. Retail inflation has remained stubbornly high at over 6 percent over the past six months.

Comments are closed.