How the RBI’s 0.50% Repo Rate Cut Will Reduce Your Home Loan EMI
Introduction
The Reserve Bank of India (RBI) has announced a 50 basis points (0.50%) repo rate cut, bringing it down to 6.50%. This move is expected to significantly reduce home loan EMIs for borrowers with floating interest rates. If you have a home loan from HDFC, SBI, ICICI, or other banks, this article explains exactly how much you will save, whether you should prepay your loan, and how to maximize benefits from this rate cut.
What is the Repo Rate and How Does It Affect Home Loans?
The repo rate is the interest rate at which the RBI lends money to commercial banks. When the RBI cuts this rate, banks borrow at a lower cost, allowing them to reduce home loan interest rates for borrowers.
Key Impacts of the 0.50% Repo Rate Cut
- Floating-rate home loans will become cheaper
- EMIs will decrease for existing borrowers
- New home buyers will get loans at lower interest rates
- Total interest burden over the loan tenure will reduce
How Much Will Your EMI Reduce?
The exact EMI reduction depends on your loan amount, tenure, and current interest rate. Below is a comparison for a ₹35 lakh home loan at 15 years:
| Loan Details | Before Rate Cut (8.75%) | After Rate Cut (8.25%) | Savings |
|---|---|---|---|
| Monthly EMI | ₹34,920 | ₹33,890 | ₹1,030 less per month |
| Total Interest Paid | ₹27.85 lakh | ₹25.90 lakh | ₹1.95 lakh saved |
| Total Repayment | ₹62.85 lakh | ₹60.90 lakh | Reduced burden |
Note: Calculations assume full transmission of the 0.50% rate cut by banks.
EMI Reduction for Different Loan Amounts
| Loan Amount | Tenure | Old EMI (8.75%) | New EMI (8.25%) | Monthly Savings |
|---|---|---|---|---|
| ₹25 lakh | 20 years | ₹22,200 | ₹21,450 | ₹750 |
| ₹50 lakh | 15 years | ₹49,890 | ₹48,410 | ₹1,480 |
| ₹75 lakh | 20 years | ₹66,600 | ₹64,350 | ₹2,250 |
💡 Pro Tip: Use an EMI calculator to check exact savings based on your loan details.
When Will Banks Reduce Home Loan Rates?
- HDFC, SBI, ICICI, and PNB are expected to pass on the rate cut within 1-3 months.
- Floating-rate loans will see an automatic EMI reduction.
- Fixed-rate loans will not benefit from this cut.
Should You Prepay or Refinance Your Home Loan?
With lower interest rates, you have two smart options to save more money:
1. Maintain the Same EMI & Reduce Tenure
- If you continue paying the old EMI (₹34,920 instead of ₹33,890), you can repay the loan faster.
- Example: A ₹35 lakh loan could be closed 1.5 years earlier, saving additional interest.
2. Refinance to a Lower Rate
- Compare rates from SBI (8.00%), PNB (8.10%), and ICICI (8.15%).
- If another bank offers a better rate, refinancing may save you ₹50,000–₹1 lakh extra.
- Check processing fees (0.35–1%) before switching.
Final Verdict: Should You Celebrate the Rate Cut?
✅ Yes, if you have a floating-rate loan – Your EMI will decrease.
✅ Yes, if you’re planning a new home loan – Get cheaper interest rates.
❌ No impact if you have a fixed-rate loan – Rates remain unchanged.
