With 50 basis points cut in repo rate since February monetary policy, the home loan rates would soon come below 8%. Currently most existing home loan rates are in the 8.15-9% range. With the latest cut in 25 basis points, home loan rates would come down to below 8% for the first time since August 2022.
Most home loan rates are linked to the external benchmark rate (EBR), which means the 25 basis point reduction would be transmitted to your home loan rate soon.
According to Adhil Shetty, CEO, BankBazaar, 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,” says Shetty.
However, for the new borrowers, the home loan rates could be around 8.5%. For example, the EBR lending rate new home loan borrowers is 8.9%. Banks charge a spread of -0.15% to 1.45% depending on the home loan customers’ risk profile.
A 25 basis points rate cut could lead to Rs 700-1000 reduction in EMI per month depending on the outstanding amount, existing interest rate and tenure. Considering a loan of Rs 50 lakh with 20-year tenure at 8.15%, a 25 bps cut in rate would lead to Rs 771 reduction in EMI every month.
The real estate companies which have been facing softening of demand due to uncertain economic conditions and stagnant income growth sees hope in the latest round of rate cut.
According to Ramani Sastri, Chairman and MD, Sterling Developers, the RBI’s decision to cut the repo rate will significantly boost investor confidence, encourage housing demand with improved affordability, and support the overall development of the real estate sector—especially by enabling more first-time homebuyers to enter the market.
The RBI on Wednesday cut the repo rate by 25 basis points to 6%. Many analysts feel the RBI may cut the repo rate by another 75 basis points in the current financial year with the terminal repo rate at 5.25% at the end of March 2026.