explained. HOW ARISEIN MCLR AFFECTS YOU @ Marginal Cost of funds- based Lending Rates (MCLR) is the lowest interest that a bank offers a customer and is applicable on loans taken before October 2019. After that, banks linked housing loans with Repo rate #QUIXPLAINED © Recently, the State Bank of India raised MCLR from 7% to 7.1%. Bank of Baroda, Axis and Kotak Mahindra banks have also raised their MCLRs by 5 bps each, across tenuresexplained. WHY THE HIKE INMCLR @ The hike in MCLR isin line @ As the yield on 10-year with RBI shifting its focus benchmark government from pushing growth to bonds crossed 7% and taming inflation. Going reached 7.15 %, it has resulted forward, RBI may even raise in increase in cost of funds, repo rates — the rate at which has prompted the which the RBI lends to banks to raise lending rates commercial banks #QUIXPLAINEDexplained. fe) O O WHAT DOES INCREASED MCLR MEAN FOR YOU @ AnincreaseinMCLRmeans @ Eventhose with existing that all housingloanslinkedto — homeloanswill see a series of MCLRwillseea rise in the interest rate hikes over the interest rates. You will either coming months, with seea rise in your EMI or an expected increase in repo rate increase in your loan tenure #QUIXPLAINEDexplained. BEFORE INCREASE AND AFTER @ Iftheratesweretogoupby @ However, iftherates were 10 basis points from 7.5% to torise by 100 basis points to 7.6% following the rise in 8.5 percent over the next one MCLR by 10 basis points,the year, the EMI forthe same loan EMlonaprincipaloutstanding would jumptoRs61,992—a ofRs50 lakh for10 yearswill = jumpofRs2,642amonth—if goup from Rs 59,350 to the tenure were kept constant Rs 59,612 #QUIXPLAINEDexplained. % WHAT SHOULD ONE DO @ Given that Fixed Deposit ® Others who don’t have rates are at their lowest in much savings but can afford recenttimes, those withhome — topayahigher EMI should loans can use part of your increase your monthly EMI savings to prepay your home loan TEXT: SANDEEP SINGH AND GEORGE MATHEW #QUIXPLAINED