Interest Rates !*%#)($*:-(

Up ... up... and away!! That's the story of interest rates in India. With the latest hike by RBI yesterday, its inevitable that rates are raised further. Now comes the tipping point. At what level will demand be curbed or increased.? Already, faced with a slowdown in new housing loan applicants, some leading banks have announced that they may not raise housing loan rates. Two wheeler loan rates are hovering around 22-24% p.a. up from around 15-18% just a few months ago.... and this has been coupled with a declining trend in monthly sales numbers. My guess is that after rising for a couple of months more.... inflation numbers will start plateauing and then will begin to fall around Nov-Dec 08. Because, over the next few months with increasing financing costs, demand for vehicles, homes and consumer goods will witness increasing fall in sales. With lower demand, funds will become more liberally available and thereby available at reduced rates. Already, corporates have warned of deferring expansion/modernisation plans due to high rates. So, having witnessed a near 50% rise in interest rates over the past three years, its time for taking a deep breath. Hang on to your home/vehicle purchase decisions till Dec 08. The first quarter of calender 2009 promises to be bring better tidings.!! Cheers till then.