RBI MPC: Home loan borrowers can breathe a sigh of relief, but how long their good days will last?
RBI repo rate: The Reserve Bank of India has maintained its repo rate at 5.25%, providing ongoing relief for home loan borrowers. This decision allows many borrowers to continue enjoying current low home loan interest rates. However, rising reta...
By Shaghil Bilali, ET Online | Updated:
ET Online
Home borrowers with loans linked to External Benchmark Linked Rate (EBLR) can breathe a little easier for now, as Reserve Bank of India (RBI) governor Sanjay Malhotra decided to keep the repo rate unchanged at 5.25%, during the Monetary Policy Committee (MPC) meeting that concluded on Wednesday (August 5, 2025).
This is the fourth time in a row that the RBI has held the repo rate steady, allowing many borrowers to keep enjoying those low home loan interest rates a bit longer.
Amit Goyal, managing director, India Sotheby’s International Realty, says, "Despite higher crude prices and June retail inflation rising to an 18-month high, the RBI has prioritised stability. It reflects confidence in the resilience of the Indian economy, while remaining watchful of global risks."
Santosh Agarwal, CEO, Paisabazaar, says the RBI's decision of holding the rate provides continuity, enabling them to plan their borrowing with greater confidence, particularly ahead of the festive season when demand for consumer credit typically gathers pace.
Also Read: Changes in EBLR & MCLR framework, interest rate charging mechanism and how reset dates are decided- RBI proposal
Last year (2025) was a good year for home loan borrowers when the RBI slashed the repo rate by 125 bps. It provided relief to borrowers with loans linked to the EBLR, especially the repo-rate linked loans, since most home loans are based on the Repo Linked Lending Rate (RLLR) benchmark.
But with retail inflation rising and the possibility of a repo rate hike getting stronger, one can’t rule out higher home loan interest rates down the line. How soon it happens will depend on whether the RBI waits for retail inflation to hit its upper tolerance band of 6% or it decides to raise the rate sooner.
How long this favourable situation lasts hinges on the RBI’s decision in the next few MPCs.
Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution, says, "The repo rate, which was last reduced to 5.25% in December 2025, has helped bring lending rates to very attractive levels for retail borrowers. As a result, home loan interest rates, which had crossed 9% a couple of years ago, have now softened to around 7%, significantly improving housing affordability."
Also Read: RBI policy: Will high-interest rate cycle return for FD investors as RBI holds repo rate amid rising inflation?
Adhil Shetty, CEO, Bankbazaar, says the RBI's decision to keep the repo rate unchanged at 5.25% means home loan borrowers are likely to see little immediate change in lending rates.
RBI repo rate (Brief history)
Factors like the repo rate and inflation impact home loan interest rates.
How repo rate impacts home loan interest rates
The repo rate impacts the home loan rates since it is the rate at which banks borrow money from the central bank. When the RBI reduces the repo rate, banks can get loans at a cheaper rate. Since banks save money with these lower-rate loans, they transfer these benefits to their borrowers by cutting interest rates on loans.
Also Read: 8th Pay Commission salary calculator: How gross salary of central government employees may double in just 7 years
Most floating rate home loans are linked to external benchmarks like repo rate. So, when the RBI cuts the repo rate, these interest rates drop right away.
On the other hand, borrowers with their home loans linked to Marginal Cost of Funds-based Lending Rate (MCLR), experience a slower transmission of the repo rate cut into their loan EMIs. As far as borrowers with fixed interest rate loans are concerned, their loans are not linked to the repo rate and there is no change in their interest rates.
The opposite also happens when the central bank raises the repo rate. Banks follow in the RBI’s footsteps and increase their home loan rates, resulting in a higher EMIs for borrowers with repo rate-linked loans.
Currently, since the RBI hasn’t changed the repo rate since December 2025, banks are keeping their home loan rates steady, as the impact of previous repo rate changes have already been completed.
However, right now, global uncertainty due to the Iran-US conflict, rising fuel prices and increased input costs are creating inflationary pressures. Retail inflation in India is also on the rise since October 2025 and has crossed the RBI’s target of 4%.
5 lowest home loan interest rates (for above Rs 30 lakh to up to Rs 75 lakh amount)
Source: Paisabazaar
How inflation can impact home loan rates in the future
In India, fuel and energy prices surged due to supply disruptions from the Israel-Iran conflict starting February end. The Rupee’s value also fell against the US Dollar, increasing India’s import bills. It led to an increase in prices of many household items. As a result, retail inflation jumped from 2.74% in January to 3.48% in April to 4.38% in June 2026.
The July retail inflation data is yet to come, but if it increases and touches the 6% upper tolerance limit of the RBI, the apex bank may hike the repo rate in future MPCs. If that happens, banks will also raise the repo rate-linked home loan rates..
CPI inflation since June 2025
For now, EMIs of repo rate-linked loans won’t get costlier but we can’t rule out a rate hike in the near future. But, there are still ways to save the interest on home loans in the future. Here, we will discuss some of those strategies.
Vikas Bhasin, managing director, Saya Group, says stability in borrowing costs enables homebuyers to plan their finances better and make long-term investment decisions without concerns over rising EMIs.
"Besides stability, home loans are currently available at attractive interest rates of around 7.25%, making homeownership more affordable than it has been in recent years," says Bhasin.
Shetty suggests that with the MPC indicating that inflation remains the key policy focus, borrowers should view the current rate environment as one of stability.
Home loan prepayment
Prepayment is an effective strategy for trimming a home loan interest, tenure or both. One can opt for prepaying a percentage of the home loan, a fixed amount or extra EMI(s) every year.
Banks allow borrowers to make a prepayment at any stage of the loan, but borrowers can save a higher amount if they prepay the loan in its early stage. When a borrower prepays a home loan, the lender provides them with two options- they can either reduce the EMI and maintain the same tenure or they can keep the same EMI with a reduced tenure.
After the prepayment, if a borrower chooses to go for a reduced EMI, the loan tenure remains the same, but there are good savings on interest amount.
If the borrower wants to maintain the same EMI amount after making a prepayment, they can save more on interest and the loan tenure can also be reduced. The interest saved in this scenario is significantly greater compared to when a borrower opts to reduce the EMI amount.
Let’s see how much interest and time you can save in different prepayment conditions. Our calculations will show only conditions where you choose to keep the EMI the same as before prepayment.
Interest and tenure saved when you make one-time prepayment of loan
Let’s assume your home loan outstanding principal is Rs 50 lakh, the remaining tenure is 20 years, and the interest rate is 8%. If you choose to make a one-time prepayment of Rs 5 lakh (10% of principal), you will save Rs 15.85 lakh in interest and four years and one month (49 months) in tenure.
One-time prepayment calculations for different outstanding loan amounts
Interest and tenure saved when you make more than one prepayment
If you don’t want to make a one-time payment equal to 10% of the principal amount, but prepay that amount in three equal instalments, you can still save Rs 14.51 lakh in interest and 46 months (3 years and 10 months) in tenure on the same Rs 50 lakh loan outstanding principal amount.
Interest and tenure saved when you pay one extra EMI each year
The third condition can be when you choose to prepay one extra EMI each year. On the same Rs 50 lakh outstanding principal amount, if you prepay one extra EMI each year, you can save Rs 10.17 lakh in interest and 3 years and 5 months (41 months) in tenure.
Prepayment calculations for different amounts of loan (when you pay 1 extra EMI each year)
Refinancing of home loan
Refinancing is another way to save interest on your home loan. In refinancing, you choose a new lender which settles the dues of your loan with the existing lender and takes over the outstanding loan. A new lender can offer a lower interest if you have a good credit score such as 700+ with a good repayment record.
If you have Rs 50 lakh outstanding principal for 20 years at 8.5% interest rate, and the new lender offers you a 7.5% interest rate, in 20 years, you can save Rs 7.47 lakh.
Interest saved on different amounts of home loans due to refinancing
This is the fourth time in a row that the RBI has held the repo rate steady, allowing many borrowers to keep enjoying those low home loan interest rates a bit longer.
Amit Goyal, managing director, India Sotheby’s International Realty, says, "Despite higher crude prices and June retail inflation rising to an 18-month high, the RBI has prioritised stability. It reflects confidence in the resilience of the Indian economy, while remaining watchful of global risks."
Santosh Agarwal, CEO, Paisabazaar, says the RBI's decision of holding the rate provides continuity, enabling them to plan their borrowing with greater confidence, particularly ahead of the festive season when demand for consumer credit typically gathers pace.
Also Read: Changes in EBLR & MCLR framework, interest rate charging mechanism and how reset dates are decided- RBI proposal
Last year (2025) was a good year for home loan borrowers when the RBI slashed the repo rate by 125 bps. It provided relief to borrowers with loans linked to the EBLR, especially the repo-rate linked loans, since most home loans are based on the Repo Linked Lending Rate (RLLR) benchmark.
But with retail inflation rising and the possibility of a repo rate hike getting stronger, one can’t rule out higher home loan interest rates down the line. How soon it happens will depend on whether the RBI waits for retail inflation to hit its upper tolerance band of 6% or it decides to raise the rate sooner.
How long this favourable situation lasts hinges on the RBI’s decision in the next few MPCs.
Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution, says, "The repo rate, which was last reduced to 5.25% in December 2025, has helped bring lending rates to very attractive levels for retail borrowers. As a result, home loan interest rates, which had crossed 9% a couple of years ago, have now softened to around 7%, significantly improving housing affordability."
Also Read: RBI policy: Will high-interest rate cycle return for FD investors as RBI holds repo rate amid rising inflation?
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Adhil Shetty, CEO, Bankbazaar, says the RBI's decision to keep the repo rate unchanged at 5.25% means home loan borrowers are likely to see little immediate change in lending rates.
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"Floating home loan rates currently range from about 7.0% to 9.4% at public sector banks and 7.3% to 9.3% at private banks, depending on the borrower's credit profile. With the MPC indicating that inflation remains the key policy focus, borrowers should view the current rate environment as one of stability," says Shetty.RBI repo rate (Brief history)
| Date | Repo rate (%) | Change (%) |
| 07-Feb-25 | 6.25% | -0.25% |
| 09-Apr-25 | 6.00% | -0.25% |
| 06-Jun-25 | 5.50% | -0.50% |
| 06-Aug-25 | 5.50% | 0.00% |
| 05-Dec-25 | 5.25% | 0.25% |
| 06-Feb-26 | 5.25% | 0.00% |
| 08-Apr-26 | 5.25% | 0.00% |
| 05-Jun-26 | 5.25% | 0.00% |
| 05-Aug-26 | 5.25% | 0.00% |
Factors like the repo rate and inflation impact home loan interest rates.
How repo rate impacts home loan interest rates
The repo rate impacts the home loan rates since it is the rate at which banks borrow money from the central bank. When the RBI reduces the repo rate, banks can get loans at a cheaper rate. Since banks save money with these lower-rate loans, they transfer these benefits to their borrowers by cutting interest rates on loans.
Also Read: 8th Pay Commission salary calculator: How gross salary of central government employees may double in just 7 years
Most floating rate home loans are linked to external benchmarks like repo rate. So, when the RBI cuts the repo rate, these interest rates drop right away.
On the other hand, borrowers with their home loans linked to Marginal Cost of Funds-based Lending Rate (MCLR), experience a slower transmission of the repo rate cut into their loan EMIs. As far as borrowers with fixed interest rate loans are concerned, their loans are not linked to the repo rate and there is no change in their interest rates.
The opposite also happens when the central bank raises the repo rate. Banks follow in the RBI’s footsteps and increase their home loan rates, resulting in a higher EMIs for borrowers with repo rate-linked loans.
Currently, since the RBI hasn’t changed the repo rate since December 2025, banks are keeping their home loan rates steady, as the impact of previous repo rate changes have already been completed.
However, right now, global uncertainty due to the Iran-US conflict, rising fuel prices and increased input costs are creating inflationary pressures. Retail inflation in India is also on the rise since October 2025 and has crossed the RBI’s target of 4%.
5 lowest home loan interest rates (for above Rs 30 lakh to up to Rs 75 lakh amount)
| Lender | Home loan interest rate (% p.a.) |
| Bank of Maharashtra | 7.10%–9.90% |
| Central Bank of India | 7.10%–9.15% |
| Bank of India | 7.10%–10.00% |
| UCO Bank*** | 7.15%–9.25% |
| Union Bank of India* | 7.15%–9.60% |
How inflation can impact home loan rates in the future
In India, fuel and energy prices surged due to supply disruptions from the Israel-Iran conflict starting February end. The Rupee’s value also fell against the US Dollar, increasing India’s import bills. It led to an increase in prices of many household items. As a result, retail inflation jumped from 2.74% in January to 3.48% in April to 4.38% in June 2026.
The July retail inflation data is yet to come, but if it increases and touches the 6% upper tolerance limit of the RBI, the apex bank may hike the repo rate in future MPCs. If that happens, banks will also raise the repo rate-linked home loan rates..
CPI inflation since June 2025
| Month | Inflation rate |
| Oct-25 | 0.25% |
| Nov-25 | 0.71% |
| Dec-25 | 1.33% |
| Jan-26 | 2.74% |
| Feb-26 | 3.21% |
| Mar-26 | 3.40% |
| Apr-26 | 3.48% |
| May-26 | 3.93% |
| Jun-26 | 4.38% |
For now, EMIs of repo rate-linked loans won’t get costlier but we can’t rule out a rate hike in the near future. But, there are still ways to save the interest on home loans in the future. Here, we will discuss some of those strategies.
Vikas Bhasin, managing director, Saya Group, says stability in borrowing costs enables homebuyers to plan their finances better and make long-term investment decisions without concerns over rising EMIs.
"Besides stability, home loans are currently available at attractive interest rates of around 7.25%, making homeownership more affordable than it has been in recent years," says Bhasin.
Shetty suggests that with the MPC indicating that inflation remains the key policy focus, borrowers should view the current rate environment as one of stability.
Home loan prepayment
Prepayment is an effective strategy for trimming a home loan interest, tenure or both. One can opt for prepaying a percentage of the home loan, a fixed amount or extra EMI(s) every year.
Banks allow borrowers to make a prepayment at any stage of the loan, but borrowers can save a higher amount if they prepay the loan in its early stage. When a borrower prepays a home loan, the lender provides them with two options- they can either reduce the EMI and maintain the same tenure or they can keep the same EMI with a reduced tenure.
After the prepayment, if a borrower chooses to go for a reduced EMI, the loan tenure remains the same, but there are good savings on interest amount.
If the borrower wants to maintain the same EMI amount after making a prepayment, they can save more on interest and the loan tenure can also be reduced. The interest saved in this scenario is significantly greater compared to when a borrower opts to reduce the EMI amount.
Let’s see how much interest and time you can save in different prepayment conditions. Our calculations will show only conditions where you choose to keep the EMI the same as before prepayment.
Interest and tenure saved when you make one-time prepayment of loan
Let’s assume your home loan outstanding principal is Rs 50 lakh, the remaining tenure is 20 years, and the interest rate is 8%. If you choose to make a one-time prepayment of Rs 5 lakh (10% of principal), you will save Rs 15.85 lakh in interest and four years and one month (49 months) in tenure.
One-time prepayment calculations for different outstanding loan amounts
| Outstanding principal amount | Outstanding tenure (years) | Interest rate (%) | Prepayment amount (10% of principal) | Interest saved (Rs) | Tenure saved (months) |
| Rs 50 lakh | 20 | 8 | Rs 5 lakh | Rs 15.85 lakh | 49 |
| Rs 60lakh | 20 | 8 | Rs 6 lakh | Rs 19.01 lakh | 49 |
| Rs 70 lakh | 20 | 8 | Rs 7 lakh | Rs 22.18 lakh | 49 |
| Rs 80 lakh | 20 | 8 | Rs 8 lakh | Rs 25.36 lakh | 49 |
| Rs 90 lakh | 20 | 8 | Rs 9 lakh | Rs 28.53 lakh | 49 |
| Rs 1 crore | 20 | 8 | Rs 10 lakh | Rs 29.10 lakh | 49 |
Interest and tenure saved when you make more than one prepayment
If you don’t want to make a one-time payment equal to 10% of the principal amount, but prepay that amount in three equal instalments, you can still save Rs 14.51 lakh in interest and 46 months (3 years and 10 months) in tenure on the same Rs 50 lakh loan outstanding principal amount.
- Loan outstanding: Rs 50 lakh
- Outstanding tenure: 20 years
- Interest rate: 8%
- Prepayment amount: Rs 5 lakh (10% of principal in three equal instalments of Rs 1,66,666 each)
- Prepayment dates: 1st prepayment (April 2026), 2nd prepayment (April 2027), 3rd prepayment (April 2028).
- Interest saved: Rs 14.51 lakh
- Tenure saved: 46 months (3 years and 10 months)
| Outstanding principal amount | Outstanding tenure (years) | Interest rate (%) | Prepayment amount (in 3 instalments) | Interest saved (Rs) | Tenure saved (months) |
| Rs 50 lakh | 20 | 8 | Rs 5 lakh | Rs 14.51 lakh | 46 |
| Rs 60 lakh | 20 | 8 | Rs 6 lakh | Rs 17.41 lakh | 46 |
| Rs 70 lakh | 20 | 8 | Rs 7 lakh | Rs 20.31 lakh | 46 |
| Rs 80 lakh | 20 | 8 | Rs 8 lakh | Rs 23.21 lakh | 46 |
| Rs 90 lakh | 20 | 8 | Rs 9 lakh | Rs 26.12 lakh | 46 |
| Rs 1 crore | 20 | 8 | Rs 10 lakh | Rs 29.01 lakh | 46 |
Interest and tenure saved when you pay one extra EMI each year
The third condition can be when you choose to prepay one extra EMI each year. On the same Rs 50 lakh outstanding principal amount, if you prepay one extra EMI each year, you can save Rs 10.17 lakh in interest and 3 years and 5 months (41 months) in tenure.
- Outstanding home loan principal amount: Rs 50 lakh
- Outstanding tenure: 20 years
- Interest rate: 8%
- Prepayment amount: one extra EMI of Rs 41,822 each year
- 1st extra EMI prepayment month: April 2026
- Interest saved: Rs 10.17 lakh
- Tenure saved: 41 months (3 years and 5 months)
Prepayment calculations for different amounts of loan (when you pay 1 extra EMI each year)
| Outstanding principal amount | Outstanding tenure (years) | Interest rate (%) | Extra EMI amount to be paid every year | Interest saved (Rs) | Tenure saved (months) |
| Rs 50 lakh | 20 | 8 | Rs 41,822 | Rs 10.17 lakh | 41 |
| Rs 60 lakh | 20 | 8 | Rs 50,186 | Rs 12.21 lakh | 41 |
| Rs 70 lakh | 20 | 8 | Rs 58,511 | Rs 14.24 lakh | 41 |
| Rs 80 lakh | 20 | 8 | Rs 66,915 | Rs 16.28 lakh | 41 |
| Rs 90 lakh | 20 | 8 | Rs 75,280 | Rs 18.31 lakh | 41 |
| Rs 1 crore | 20 | 8 | Rs 83,644 | Rs 20.34 lakh | 41 |
Refinancing of home loan
Refinancing is another way to save interest on your home loan. In refinancing, you choose a new lender which settles the dues of your loan with the existing lender and takes over the outstanding loan. A new lender can offer a lower interest if you have a good credit score such as 700+ with a good repayment record.
If you have Rs 50 lakh outstanding principal for 20 years at 8.5% interest rate, and the new lender offers you a 7.5% interest rate, in 20 years, you can save Rs 7.47 lakh.
Interest saved on different amounts of home loans due to refinancing
| Outstanding principal amount | Outstanding tenure (years) | Current interest rate | Interest rate after refinancing | Amount saved due to refinancing |
| Rs 50 lakh | 20 | 8.50% | 7.50% | Rs 7.47 lakh |
| Rs 60 lakh | 20 | 8.50% | 7.50% | Rs 8.96 lakh |
| Rs 70 lakh | 20 | 8.50% | 7.50% | Rs 10.45 lakh |
| Rs 80 lakh | 20 | 8.50% | 7.50% | Rs 11.95 lakh |
| Rs 90 lakh | 20 | 8.50% | 7.50% | Rs 13.44 lakh |
| Rs 1 crore | 20 | 8.50% | 7.50% | Rs 14.94 lakh |
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