RBI’s new rules may increase your EMIs, make it difficult to get home loans for some

economictimes.indiatimes.com:

Furthermore, under the new guidelines, loan sanction letters will need to mention the costs associated with transitioning from a floating to a fixed interest rate in the future. Lenders will be required to ensure that even in the event of significant rate hikes, the EMIs will continue to cover the monthly interest payments, preventing any increase in the outstanding loan balance from the previous month after the EMI is paid. The RBI's circular on resetting floating interest rates for EMI-based personal loans said that lenders should not solely assess repayment capacity based on prevailing interest rates but they should factor in a cushion to ensure borrowers can meet their payment obligations even if interest rates climb.In the past, interest rates have experienced fluctuations of up to six percentage points within a single loan cycle, which means the interest burden had sharply increased and typically the loan tenure rose by years. Lenders have sometimes refrained from adjusting EMIs, as extending the EMI duration would result in higher interest earnings.

These home loan borrowers can change loan tenures, EMIs or switch to fixed-rate during loan resets: RBI

The new regulations require lenders to evaluate repayment capacity at a rate higher than the prevailing one. Presently, banks determine borrowers' repayment capability using prevailing interest rates. For example, an individual with 20 years until retirement might afford a Rs 74,557 EMI for a Rs 1 crore loan at a 6.5% interest rate. However, at an 11% interest rate, their affordability might decrease to Rs 72 lakh. Most banks currently don't offer fixed-rate loans due to short-term deposit structures. A senior banker told ToI that if forced to