Home loan borrowers may expect some relief in the form of lower EMIs starting from the RBI’s February monetary policy review next year. Experts believe that the Reserve Bank is likely to ease its key interest rate, known as the repo rate, by at least 25 basis points during its February monetary policy meeting, scheduled shortly after the presentation of the Union Budget 2025-26.
The RBI is scheduled to hold six Monetary Policy Committee (MPC) meetings in 2025, in February, April, June, August, October, and December. Experts predict that the central bank could cut the repo rate in at least four of these meetings, reducing it by 25 basis points each time, for a total reduction of 100 basis points. A 100-basis-point repo rate cut by the RBI during the year would bring significant relief to loan borrowers, as banks are expected to follow suit by lowering lending rates, making loans more affordable.
In the latest monetary policy review on December 6, the Reserve Bank decided to keep the benchmark rate unchanged at 6.5%, maintaining the status quo on its rate for the 11th straight time.
Read More: FD rates even before RBI changed the Repo Rate, know what are the new interest rates..
How much could interest rates drop in 2025? Experts weigh in
Although the RBI maintained the repo rate unchanged in its December meeting, analysts believe rate cuts are on the horizon for 2025. According to HSBC Research, the RBI may go for 2 rate cuts of 25 bps each in February and April, reducing the repo rate to 6%.
However, some experts predict a more aggressive easing cycle. Japanese investment bank Nomura expects the RBI to slash rates by up to 100 bps over the course of 2025, signaling a more substantial relief for borrowers.
Here’s how a 100 bps repo rate cut could impact your home loan EMI
Currently, major banks charge home loan interest rates as high as 9.75%. If the RBI reduces the repo rate by 100 basis points (bps), it could translate to significant savings for borrowers.
For instance, a home loan borrower paying an EMI of Rs 45,793 per month on a Rs 50 lakh loan at an interest rate of 9.25% (tenure: 20 years) would see their EMI drop to Rs 42,603 if the rate reduces by 1 percentage point or 100 bps. This would result in a monthly saving of Rs 3,190.
