RBI has cut the repo rate for the second time in a row. In February, it was cut by 25 basis points and today also the same amount has been cut. In this way, it has been reduced by 50 basis points i.e. 0.5% in two times. It is believed that there is scope for further reduction in it as there has been a decline in inflation.
The year 2025 is going very well for home loan borrowers. RBI had cut the repo rate by 25 basis points in February. Today again the central bank has announced a cut of 25 basis points in the repo rate. This means that home loan borrowers, especially those with floating rate home loans, will see a significant reduction in their EMIs in the coming days. It is expected that banks will soon pass on the benefit of this rate cut to the customers. After today’s cut, the repo rate has now come down to 6%. RBI Governor Sanjay Malhotra has also changed the monetary policy stance from neutral to accommodative. With this change, home loan borrowers may see further repo rate cuts in the future. This will further reduce the interest rate on their home loans.
CEO Adil Shetty said that the step to cut the repo rate has been taken to increase consumption and accelerate economic growth. The purpose of reducing the policy rate is that people take more loans, which will increase investment in real estate and increase the demand for houses. But the effect of this rate cut will depend on how quickly and efficiently the commercial banks pass on its benefits to the customers. It is necessary to transmit the rate quickly and effectively so that the expected results can be achieved.
How much will be the savings on EMI?
Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution Pvt Ltd, explains how much will the home loan borrowers save on their EMI due to the repo rate cut of 50 basis points. If the original interest rate on a 20-year home loan was 9%, then it is reduced by 0.5% to 8.5%. So there will be a lot of savings in EMI. Suppose someone has taken a loan of Rs 30 lakh for 20 years at the rate of 9 percent. Earlier his installment was ₹ 26,247 which will now be ₹ 25,071. In this way, he will get a benefit of ₹ 1,176 every month. This benefit will be ₹ 2.82 lakh in the total tenure.
| Loan Amount | Current EMI | EMI after Deduction | Monthly Savings | Total Savings |
|---|---|---|---|---|
| ₹30 Lakh | ₹26,247 | ₹25,071 | ₹1,176 | ₹2.82 Lakh |
| ₹50 Lakh | ₹43,745 | ₹41,785 | ₹1,960 | ₹4.70 Lakh |
| ₹70 Lakh | ₹61,243 | ₹58,499 | ₹2,744 | ₹6.58 Lakh |
| ₹1 Crore | ₹87,490 | ₹83,570 | ₹3,920 | ₹9.40 Lakh |
| ₹1.5 Crore | ₹1,31,235 | ₹1,25,355 | ₹5,880 | ₹14.11 Lakh |
What Will there be more rate cuts in the future?
The central bank is tasked with targeting inflation within the 4% range. The Economic Research Department of the State Bank of India has said in its Ecowrap report that India’s CPI inflation has fallen to a 7-month low of 3.6% in February 2025. The central bank may cut rates consecutively in April and August 2025. It is expected that there will be a reduction of at least 75 basis points in total. Shetty said that with today’s rate cut of 25 bps, home loan rates are going to go below 8% again. The lowest rates we are seeing at the moment are between 8.10% and 8.35%.
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