RBI Repo Cut: Will Home Loans & EMIs Get Cheaper Now? Find Out What Experts Say

The Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday announced that the central bank is reducing the key lending rate, or repo rate, by 25 basis points. It means that home loans and their EMIs will get cheaper in the days to come.

The repo rate stands at 6% after the latest cut. The RBI Governor announced the decision after the conclusion of a three-day meeting of the central bank's Monetary Policy Committee (MPC).

What RBI Governor Said?

At a press conference, RBI Governor said, "First and foremost, uncertainty in itself dampens growth by affecting investment and spending decisions both of businesses and households. Second, the dent on global growth due to trade frictions will also impede domestic growth. Third, higher tariffs shall have a negative impact on net exports. The impact of relative tariffs, our relative tariffs vis some of the other countries are quite low. Then there is the unknown of the elasticities of our export and import demand and the policy measures adopted by us. India is very vigorously and proactively engaging with the US administration on the foreign trade agreement..."

The RBI Governor Sanjay Malhotra added, " The MPC (Monetary Policy Committee) voted unanimously to reduce the policy repo rate by 25 basis points to 6 % per cent with immediate effect."

Will Home Loan Gets Cheaper Now?

Speaking to the Economic Times, Adhil Shetty, CEO of Bankbazaar.com, said that the Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points to 6% in an effort to stimulate consumption and boost economic growth. He explained that the rate cut was intended to make borrowing more affordable, thereby giving a boost to the real estate industry. However, he noted that the effectiveness of this move would largely depend on how quickly and efficiently commercial banks passed on the benefits to borrowers.

This is the second rate repo cut this year, following a 25 basis point reduction in February 2025.

Shetty says, "Home loan rates are about to go sub-eight again with today's 25 bps rate cut. The lowest rates we're currently seeing are between 8.10 and 8.35. However, the lowest rates are typically reserved for prime borrowers (credit score > 750) and refinance cases. Homeowners paying a substantially higher rate (50 bps or higher above prevalent rates) are advised to refinance their loans to avail lower rates.

Do note that automatic, immediate and full rate cuts are available only on repo-linked home loans offered by banks. Despite six years of repo-linking, we see that only 50% of floating rate loans with government banks are still linked to the MCLR and 2% to Base Rate. Borrowers with these banks are advised to take stock of their older loan benchmark and consider a refinance to a repo-linked home loan if it helps them save interest outflows."

Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution Pvt Ltd, elaborated on the potential savings for home loan borrowers following the cumulative 50 basis points reduction in the repo rate. According to him, a 20-year home loan with an original interest rate of 9%, a 0.5% reduction to 8.5% would lead to significant EMI savings. However, the actual benefit would vary depending on how swiftly banks adjusted their lending rates.

In recent months, the real estate market has remained stable. However, the higher interest rates and the rise in property prices have been a worrying factor for new-home buyers.

Speaking to India Today, Narinder Wadhwa, Managing Director and CEO of SKI Capital, said: "Lower rates will reduce borrowing costs and may lead to higher consumption and investment. This will help offset some of the negative impact from global issues. But the benefits may be limited if global demand weakens further or if trade tensions get worse."