How Does Inflation Affect Your Home Loan Interest Rate?
Inflation is a phenomenon which affects anything and everything. From vegetables to a packet of chips, to gadgets, to real estate, nothing is left out when inflation hits the country. Depending on the things which have a hiked price, in a chain reaction, things related to it will get a hike, and other things and so on, which will lead to an overall hike throughout the country.
The menace of inflation is affecting your Home Loan So, just like a single increase leads to an overall increase in costs all over the country, an increase in the national debt will lead to an increase in Home Loan rates. This is entirely a chain process. How banks deal with inflation? The increase in national debt will ask for a repayment, for which the amount of money being borrowed by the RBI from the public and private sector banks will increase. These banks will in turn decrease the amount of payments and increase the interest rates, so as to extract the money from the borrowers. Here is an infographic to explain how inflation affects Home Loan interest rates.