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RBI rate hike worries real estate sector

03 August 2018

RBI hikes repo rate: On Wednesday, the Reserve Bank of India (RBI) increased the repo rate by 25 basis points to 6.5 per cent.

Repo rate has been raised by 25 basis points to 6.50 percent.

An RBI repo rate hike usually sees commercial banks hike their respective interest rates on home, auto and other loans.

Today's hike in interest rates will make loans more costlier in the coming days.

"I agree with markets", said Samuel Tombs, an economist at Capital Economics Ltd.

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Throughout his tenure as governor, Carney has faced accusations of being a so-called "unreliable boyfriend", frequently promising rate hikes and then ultimately failing to deliver.

Rohit Poddar, managing director, Poddar Housing and Development Ltd, said, "I personally believe that the home buyers should not worry as it will be hard for many banks to increase the interest rate".

"Every saver now has their fingers crossed that this latest base rate rise may go some way to returning rates to those levels, but like last time, providers are likely to be slow to react and choosy with their increases". The following hike by the RBI comes after it had raised the repo rate for the first time in four years to 6.25%.

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Surendra Hiranandani, chairman and managing director of House of Hiranandani, said inflation is expected to trend upwards and might surprise in the second half of the year owing to increase in higher government spending.

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SNP economy spokesperson Kirsty Blackman MP added: "The hike in interest rates will deliver a further blow to the living costs and standards of millions of families across the United Kingdom, who are already feeling the squeeze as prices rise too fast".

In a hugely symbolic day for the Bank of England, the Monetary Policy Committee voted to increate the rate from 0.5% in only the second rate rise in a decade. The MPC also noted that United Kingdom growth over the forecast period would nudge slightly higher while inflation will remain above 2% before reaching target in 2020.

The majority of mortgage-holders, who have fixed rates, will not see a difference. However, the monetary policy committee maintained its stance at neutral.

He confirmed the prospect for further rises as he said if rates stayed at 0.75%, inflation would remain above 2% throughout the forecast horizon. In other words: when inflation is steady at the Bank's 2% target and the economy is running at its maximum speed limit.

In its accompanying quarterly inflation report, the Bank kept its forecast for growth this year unchanged at 1.4 per cent, but increased the outlook for 2019 to 1.8% from the 1.7 per cent previously predicted. This has seen the average two-year fixed mortgage rate increase from 2.33% in November 2017 to 2.53% today.

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RBI rate hike worries real estate sector