Rating agency Moody’s said that the recent interest rate cuts by the Reserve Bank of India will help offset rising funding costs and prevent further mortgage rate rises this year, and is a credit positive for residential mortgage-backed securities (RMBS).
RBI reduced the repo rate by 25 bps each in February and April.
Moody’s said strong loan characteristics, low household debt and India’s high economic growth would support borrowers’ ability to repay mortgage loans, keeping RMBS delinquency rates low over the next year.
“We expect mortgage interest rates to remain steady through the rest of 2019 rather than decline as a result of the RBI’s cuts, given that lenders’ funding costs have increased significantly,” Moody’s said.