How will home loan interest and EMIs be affected after the recent repo rate cut by RBI?

General
1

How EMI is affected when the repo rate is reduced?
Example: A home loan of 40 lakhs with an interest rate of 8.8% p.a. for 20yrs Now if repo rate is reduced by 25 bps, what all things will change? Will EMI will reduce or number of EMI will be reduce?

2

Hi @royanish388,

With the repo rate coming down, banks can now borrow from the RBI at a lower cost, and this benefit is typically passed on to customers in the form of reduced lending rates. If your lender reduces the home loan interest rate by 0.25%, it will drop from 8.8% p.a. to 8.55% p.a.

This change in interest rate directly impacts your EMIs:

  • If you keep the loan tenure fixed, your EMI will reduce.
  • If you choose to keep the EMI constant, your loan tenure (number of EMIs) will reduce.

The actual impact will depend on whether your loan is on a floating rate and how much of the repo rate cut your bank passes on to you.

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