New Delhi: There has been relief in the retail inflation rate announced for July 2024 due to the reduction in inflation of food items. The inflation rate has come down to 3.5%, below the RBI's tolerance band of 4%. If this reduction in inflation continues in the coming months, then there can be a big benefit on EMIs like home loans, car loans, and education loans. That is, people who are paying EMI can get the benefit of cheaper EMI.

Loans are expected to become cheaper from the second half

According to Rajni Sinha, Chief Economist, CareEdge Ratings, retail inflation has come down to 3.5% due to last year's base effect, but some increase has been seen in core inflation. Core inflation reached 3.4% in July 2024, with the increase in telecom tariffs and fuel prices contributing to it. Rajni Sinha believes that if food inflation comes down further, the Reserve Bank of India (RBI) may cut interest rates in the second half of the current financial year.

The loan became costlier by 2.50% in 9 months

Before May 2022, the RBI repo rate was 4%, but after the retail inflation rate reached 7.8% in April 2022, RBI continuously increased the repo rate. The repo rate has now become 6.50%, due to which banks and housing finance companies increased the interest rates of other loans including home loans. This directly affected those homebuyers who already had a home loan. Along with this, car loans, education loans, and other personal loans also became expensive.

How much has the EMI burden increased?

Within a year, the EMI burden on homebuyers increased drastically. For example, if someone took a home loan of Rs 40 lakh in 2021 at an interest rate of 7% for 20 years, then his monthly EMI at that time was Rs 31,012. However after the repo rate increased, this EMI increased to Rs 37,285. That is, an additional burden of Rs 6,273 increased every month, which reached Rs 75,276 annually. If this trend of declining inflation continues, then homebuyers are expected to get relief from expensive EMIs.