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Home Loan Relief: Rates Set to Plunge to Pandemic Lows After RBI Cut

Great news for homebuyers! The RBI has just cut its key interest rate, which means banks are likely to lower home loan rates soon. You could see rates drop to levels we haven't seen since the pandemic, potentially around 7.1%. This translates to real savings, like paying about Rs 1,440 less every month on a big loan. The central bank is pumping extra cash into the system to make sure these lower rates actually reach people.

Key Points: RBI Rate Cut to Push Home Loan Rates to Pandemic-Era Lows

  • RBI cuts repo rate by 25 bps to 5.25% to spur economic growth and consumption
  • New home loan rates may fall to around 7.1%, matching pandemic-level lows
  • Borrowers could see EMI savings of ~Rs 1,440/month on a Rs 1 crore, 15-year loan
  • Banks face margin pressure, while NBFCs benefit immediately from lower funding costs
  • RBI infuses massive liquidity via OMO purchases and forex swaps to aid transmission
2 min read

Home loan rates expected to fall to pandemic lows after RBI repo rate cut

RBI's 25 bps repo rate cut could slash home loan EMIs, with rates potentially dropping to 7.1%, offering major savings for new borrowers.

"On a Rs 1 crore home loan for 15 years, a 0.25 percentage reduction would lower the EMI by roughly Rs 1,440 per month - Analysts"

New Delhi, Dec 6

As the Reserve Bank of India’s (RBI) monetary policy committee cut the repo rate by 25 basis points to 5.25 per cent, home loan rates are poised to fall to levels last seen during the Covid-19 pandemic.

Borrowers can expect their home loan interest rate to decline by 25 bps to about 7.1 per cent as several public sector banks, including Union Bank, Bank of India and Bank of Maharashtra, currently offer home loans at 7.35 per cent, according to multiple media reports.

On a Rs 1 crore home loan for 15 years, a 0.25 percentage reduction would lower the EMI by roughly Rs 1,440 per month, analysts said.

According to bankers, as the new loans are to be priced at 7.1 per cent, lenders will have to sharply cut deposit rates or revise spreads over the benchmark, leaving new borrowers to pay more than existing floating‑rate customers.

Banks are set to see a compression in net interest margins until deposit rates ease, while Non‑Banking Finance Companies stand to benefit immediately from lower funding costs.

Analysts said that the RBI's neutral stance and its open market operations purchases will keep ample liquidity in the system and help transmit rate cuts to the grassroots.

RBI unveiled plans of Rs 1 trillion of open market operations purchases and a 3-year USD/INR buy-sell swap of $5 billion, which is expected to infuse about Rs 1.45 trillion of liquidity.

RBI MPC members unanimously decided to reduce the repo rate by 25 basis points to 5.25 per cent from 5.5 per cent earlier to spur growth in the economy.

Analysts said that the RBI's decision to cut the repo rate is a move that uses the monetary space created by low inflation to stimulate consumption and strengthen the growth cycle.

- IANS

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Reader Comments

S
Sarah B
As an NRI looking to invest in property back home, this makes the market more attractive. Lower rates combined with potential price corrections could be a good entry point.
V
Vikram M
Good move by RBI to spur growth. But I'm skeptical about the transmission. Banks are quick to hike loan rates but drag their feet when cutting them. Let's see if the common man actually benefits.
P
Priya S
This is a double-edged sword for senior citizens like my parents. Their fixed deposit interest will fall further, affecting monthly income. The government should think about savers too.
R
Rohit P
Finally some relief! I took a loan last year at 8.5%. Will my floating rate come down automatically, or do I have to run to the bank? The article says new borrowers might pay more than existing ones - that's confusing.
M
Michael C
Interesting analysis. The liquidity infusion of Rs 1.45 trillion is massive. Should boost the real estate sector which has been in a slump. Good for overall economic momentum.

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