Repo Rate Cut by 25 Bps: What It Means for Home Loans and Borrowers
Repo Rate Cut and Its Effects
The Reserve Bank of India (RBI) has made a bold decision, announcing a repo rate cut by 25 basis points, lowering it to 5.25 percent. This change signals a favorable shift for homebuyers as home loan EMIs and interest rates are set to drop.
Impact on Existing Borrowers
With the repo rate cut, borrowers will see lower interest rates on their home loans. Banks usually keep EMIs unchanged unless requested, meaning loan tenures may shorten significantly.
- For example, a Rs 50 lakh loan at 8.5 percent interest could see a reduction in its tenure from 20 years to 198 months.
- Choosing to lower the EMI will still yield savings, but not as much as keeping the higher EMI.
Strategies for Managing Home Loans
According to experts, maintaining higher EMIs during a low-interest cycle could be advantageous. The key is to reduce loan tenure while managing monthly payments.
- Retain a higher EMI to close out the loan earlier.
- Consider switching to repo-linked products for existing loans.
As the market adapts to this repo rate cut, borrowers should evaluate their options to leverage the benefits.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.