The ongoing rate hikes are unlikely to impact repayments by home loan borrowers despite an increase in the monthly instalments, a rating agency said on Tuesday.
Mortgage lenders have limited headroom to extend the loan tenures given the fact that the prime home loan segment already has long tenures, and a further extension in loan tenures will lead to overall tenures extending beyond the working life of the borrower, rating agency Icra said.
As a result, equated monthly instalments (EMIs) will go up by 12-21 per cent for prime home loans, while the same will go up by 8-13 per cent in the case of the affordable home loan segment, its sector head for financial sector ratings Manushree Saggar said.
“While there is an expectation of a further increase in interest rates, lenders have limited headroom to increase loan tenures; thus, EMIs would have to be revised upwards. However, this is unlikely to impact the HFCs asset quality indicators significantly,” Saggar said.
Even with revised EMIs, the fixed obligation to income ratio (FOIR) is expected to increase by less than 10 percentage points and hence remain manageable, unless the original loans were given at aggressive FOIRs, she added.
It can be noted that the RBI has hiked rates by 1.90 per cent since May this year in response to the runaway inflation, which has been transmitted into rates paid by home borrowers as well.