Reduction in home loan rates as the RBI cuts repo rate by 50 BPS

In the Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) has cut the repo rate by a whopping 50 basis points. Repo rate refers to the rate at which the Reserve Bank of India loans to other banks.

The repo rate now stands at 5.50 per cent from the previous 6 per cent. This means banks will now be able to lend money to borrowers at lower interest rates. In short, this would mean lower Equated Monthly Instalments (EMIs) in the coming months for individuals who have already taken a home loan. For example, suppose an individual had originally taken an INR 25 lakh home loan at an 8.5% rate of interest with a tenure of 20 years. After the 3 rate cuts, the revised interest rate becomes 7.5%. In case of interest rates with variable EMIs, they will now save INR 1,555.75 in monthly EMIs. In case of interest with fixed EMIs, tenure will get reduced by 3 years or 36 months.

Though the effect will take some time to reflect on home loan borrowers’ EMIs, turnaround is believed to be quicker this time. Also, interested homebuyers can now feel more confident in opting for a home loan.

Source: timesofindia, news18