RBI Breaking: Homebuyers Get Relief as RBI Reduces Repo Rate by 25 bps

The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points, bringing it down to 5.25%. This means homebuyers are likely to get some relief in their loan interest rates and EMIs.

With this latest cut, the RBI has now reduced the repo rate by 125 bps this year. The rate-cut cycle actually began in February and this is the first time since May 2020 that such consistent cuts have been made.

Because of these cuts, the repo rate has fallen from 6.5% to 5.25%. As a result, many major banks, including ICICI Bank, HDFC Bank, SBI, Bank of Baroda, and Canara Bank, are offering home loan interest rates starting from 7.3% to 7.9%. Lower repo rates generally push down home loan rates and EMIs. However, banks usually do not reduce EMIs directly; instead, they shorten the loan tenure while keeping EMIs the same.

A comparison of home loan rates between January 31 and November 28 shows that most public sector banks have lowered their home loan rates by around 100 bps, matching the RBI’s cuts. But some private banks have not passed on the entire benefit to new borrowers. Instead, choose to adjust it over the repo rate instead.

Financial advisers recommend switching to repo-linked home loan products for people who already have home loans at higher interest rates.