Home Loan Interest Rate Latest News, Trends & Forecast 2023 - Kotak Bank
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10 MAY, 2023

The latest trends, Home Loan news, and forecasts for interest rates indicate a continuous increase since May 2022, when the Reserve Bank of India (RBI) began raising the repo rate. The repo rate has been increased six times by RBI, with the latest hike of 25 basis points on February 8, 2023. 

It is expected to push Home Loan rates up to 9.25%. Borrowers in this situation can either increase the Equated Monthly Instalments (EMIs) on their Home Loan, increase the tenure or choose to prepay the loan. Let’s study the Home Loan interest rate news to understand everything clearly.

Overview of Home Loan

Due to the high cost of real estate in India, many individuals opt for Home Loans to become homeowners. A Home Loan is a secured loan taken to purchase a residential or commercial property, wherein the property is mortgaged to the lender. The loan is repaid monthly through EMIs, consisting of the principal amount and the interest.

Different types of Home Loans are available for borrowers based on specific requirements, such as:

  • Home Purchase Loan
  • House Expansion/Extension Loan
  • Home Improvement Loan
  • Home Conversion Loan
  • Home Loan Balance Transfer
  • Top-up Loan
  • Joint Home Loan

It is essential to select a Home Loan that aligns with one's needs to ensure a higher chance of approval. Certain features of the Home Loan, such as the loan-to-value ratio, are regulated by the RBI. To check eligibility for a Home Loan, one can use the Home Loan Eligibility Calculator.

There are mainly two types of Home Loans based on the interest rate i.e., Fixed-Rate Home Loans and Floating-Rate Home Loans. In a Fixed Rate loan, the interest rate is fixed. On the other hand, a Floating-Rate loan interest rate changes due to market conditions.

Latest Home Loans News and Trends in India

According to the Home Loan interest rate news, there have been six consecutive interest rate hikes by the Reserve Bank of India (RBI). It has resulted in concerns from real estate developers and homebuyers.

In less than a year, the lowest Home Loan rates have surged from around 6.5% to 9%, causing fears that it may impact homebuyer sentiments, particularly in the affordable and mid-range segments. While luxury projects are not expected to suffer from the higher interest rates, housing demand could take a hit if interest rates remain high.

Nevertheless, as per Home Loan interest rate news, the housing market can remain resilient, with the average home prices predicted to increase by 5.5% and 5% this year and the next, respectively. Although inflation and rising interest rates may impact demand in the short term, the need for homeownership is expected to grow. It will lead to steady growth in the real estate industry over the next two to three years.

However, the growth will depend on India’s economy’s performance amid the ongoing global slowdown. The burden of the higher interest rates can decrease demand in the affordable and mid-segments.

Impact of Home Loan News on Homebuyers and Homeowners in India

According to the latest news on Home Loan interest rates, increasing the repo rate can lead to an increase in Home Loan rates. It could significantly impact affordable housing, a crucial driver of the housing market in India. First-time home buyers, who heavily rely on Home Loans, can be particularly affected.

However, the impact on the luxury housing segment is expected to be minimal, as demand in this sector is not as sensitive to interest rate changes. It's worth noting that previous rate hikes have not significantly dampened the demand for homes. It is because positive buyer sentiment and investor interest in residential real estate have helped to cushion the adverse effects of such increases.

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The latest Home Loans news on interest rates in India suggests a continuous increase due to the RBI's repo rate hikes. It could lead to higher EMIs for borrowers and can impact demand in the affordable and mid-range segments of the housing market.

However, it is expected that the real estate industry will continue to grow steadily over the next few years, although this growth will depend on India's economic performance. According to Home Loan latest news, the impact on the luxury housing segment is expected to be minimal, but first-time homebuyers can be particularly affected.


1. How are Home Loan interest rates determined?

Home Loan rates news states that the RBI sets the benchmark rate known as the repo rate. It is a primary factor in determining the Home Loan interest rate. Financial institutions then use this rate as a reference and charge an interest rate on their Home Loans.

2. Will Home Loan interest rates decrease in the near future?

According to the Home Loan rates news, the upcoming interest rate hike by the RBI may not be the final one, even if the central bank does not pause this time. The future direction of the RBI's policies will likely depend on the global stance of central banks and any possible relief in inflation levels. 

The recent rate hikes in India are not solely attributed to inflation. They are also influenced by various macroeconomic factors on a global level, such as supply chain disruptions, the energy crisis, and rising inflation worldwide.

3. Can borrowers negotiate the Home Loan interest rate with the bank?

If you have a strong credit history with no missed payments, you can contact your lender and inquire about the lowest Home Loan rates offered to new customers. You may be able to negotiate and secure the same interest rate for your loan as well.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.