Mortgage lenders have limited headroom to extend the loan tenure, given the fact that the prime home loan segment already has a longer tenure, and a further extension in the loan tenure would extend the total tenure. working life of the borrower, the rating agency added.
As a result, Equated Monthly Installments (EMIs) will go up by 12-21 per cent for prime home loans, while it will rise to 8-13 per cent in case of Equated Monthly Installments (EMIs). Affordable Home Loan SegmentIts sector head for the rating of the financial sector, Manushree Sagar said.
Sagar said, “There is an expectation of further hike in interest rates, but as lenders have limited scope to extend the tenure of the loan, the EMI will have to be raised upwards.” ,
Fixed Liability to Income Ratio, even with revised EMIs (Neutral) is expected to grow by less than 10 percentage points and therefore remain manageable, unless the original loans were disbursed at an aggressive FOIR, it said.
It may be noted that the Reserve Bank has hiked rates by 1.90 per cent since May this year in response to runaway inflation, which has been transmitted to the rates paid by the household. borrowers Too.
Icra said the increase in FOIR could also be partially offset by the expected increase in earnings levels with improving operating environment.
Asset quality for home loan benefits from the fact that home loan EMIs get priority over other obligations as the loan is mostly taken for self-occupied homes.
Additionally, lenders may not give full escalation to end borrowers in view of the competitive market place and thus, the impact on EMIs may be further limited, pointing out that housing finance companies have reduced lending rates by around 0.50-1. has increased. percentage in H1 FY2023 as compared to an increase of 1.90 per cent in the benchmark repo rates.
Some lenders may follow a mixed approach of varying both EMI and tenure to manage the monthly loan burden of the borrowers, which may result in better repayment rates.
(with PTI inputs)