The regime of record low interest rates which home loan borrowers were enjoying is all set to end with the Reserve Bank of India (RBI) hiking the policy repo rate by 40 basis points.

Commercial banks are expected to announce upward revisions on loans linked to an external benchmark such as the repo, which would pinch both the existing and the new borrowers.

The marginal cost of funds based lending rate (MCLR) may also go up as the cost of funds for banks will inch up with the central bank increasing the cash reserve ratio (CRR) by 50 basis points.

Analysts said if home loan rates go up 40 basis points, the EMI will rise a little over Rs 700 per lakh for a Rs 30 lakh loan with a tenure of 20 years.

The rates for new borrowers will go up immediately after the bank announces the hike, while for existing customers the reset may vary from one bank to another.

Some lenders do it once every three months, while others do it in the beginning of a quarter.

After the RBI brought down the repo rate to a record level of 4 per cent, from 5.15 per cent during the pandemic, interest rates on home loans had plunged to all-time lows —thereby aiding the real estate sector which saw a rise in demand for affordable and in high-end properties as well.

An unhappy Anuj Puri, chairman, Anarock Group, said for home buyers, the hike from the RBI signals an imminent end to the all-time low interest regime, which has been one of the major drivers behind home sales since the pandemic began.

“Rising interest rates and inflationary trends in basic raw materials in construction including cement, steel, and labour cost will add to the burden of the residential sector, which did significantly well in the previous quarter. ”

“This rise in interest rates will ultimately impact overall acquisition cost for homebuyers, and may dampen residential sales to some extent,’’ he said.