In a move offering relief to home loan borrowers, the Reserve Bank of India (RBI) reduced the repo rate by 25 basis points to 6.25% during its monetary policy meeting on February 7, 2025. This marks the first rate cut in nearly five years, a period in which borrowers primarily experienced either increases or stagnation in interest rates. The decision was made by the Monetary Policy Committee (MPC), under the direction of new Governor Sanjay Malhotra. The last time the RBI reduced the repo rate was two years ago.

 

Following the RBI's decision, lending institutions are expected to lower interest rates on floating-rate home loans. For example, a home loan of ₹50 lakh at an interest rate of 8.5% for a tenure of 20 years, would have previously required an EMI of ₹43,059. With the new rate of 8.25%, the EMI will now reduce to ₹42,452, leading to a monthly saving of ₹607 and an annual saving of ₹7,284. According to Adhil Shetty, CEO of BankBazaar, a 25 basis point cut from April will bring down your interest outgo by ₹8,417 per lakh. On a ₹50 lakh loan, this results in savings of ₹4.20 lakh over the tenure, reducing the loan period by 10 EMIs.