To calculate the effective interest rate on the house, a risk premium is also added to the BRLLR. According to the bank’s website, for salaried customers, a risk premium of 1.35% is added. The risk premium depends on various factors such as CIBIL score, employment profile, loan amount, etc. The effective interest rate is between 7.95% and 9.30%. If an individual is self-employed or a self-employed customer, an additional 0.10% is also charged. For bank staff members, the effective interest rate is 7.95% or the BRLLR.
How will this affect you?
With the Bank of Baroda increasing the interest rate, your EMIs on home loans will increase. For individuals whose EMI has not yet been deducted from their bank account, the bank will recalculate the EMI before a deduction is made.
It is important to note that the recalculation of the EMI will be made on the basis of the outstanding principal amount, rather than the amount of the loan taken out.
The EMI you pay has two components: principal and interest. As the number of EMIs paid increases, the amount of principal repaid increases and the interest paid decreases.
Why did the RBI raise the repo rate?
Since the beginning of the financial year, the central bank has raised the repo rate three times, including an unannounced announcement made in May 2022. RBI raised the repo rate by 40 basis points in May. Again, in its June and August monetary policy reviews, the RBI raised the repo rate by 50 basis points each time. The central bank went on a rate hike spree due to rising inflation. Retail price inflation has remained stubbornly high at over 6% for more than the past six months.