Home loan EMI for these borrowers will go up as RBI increases repo rate by 25 bps: Know the impact on Rs 25 lakh-Rs 2 cr home loans

Borrowers with home loans linked to the External Benchmark Linked Rate (EBLR) have enjoyed a low-interest-rate cycle for a long time. However, their joy ride has now ended as as the Reserve Bank of India (RBI) increased the repo rate from 5.25% to 5.50% in its Monetary Policy Committee (MPC) meeting today (Wednesday, October 7, 2026).

After December 2025, this is the first time that the RBI has changed the repo rate, which means borrowers who have their loans linked to the External Benchmark Linked Rates (EBLR) will now have to pay a higher equated monthly instalment (EMI) on their loans once their lender increases the rate.

Home loan borrowers had a good time last year (2025) when the RBI cut the repo rate by 125 bps. It provided relief to borrowers with loans linked to the EBLR, mainly the repo rate-linked loans, since most home loans follow the Repo Linked Lending Rate (RLLR) benchmark. But soon, their loan EMIs will rise.


Banks may take a few weeks to some months to increase EBLR home loan rates. Here’s an illustration of how your home loan of Rs 25 lakh to Rs 2 crore with an outstanding tenure of 20 years will be impacted after a 25 bps interest rate hike.

Also Read: Can banks raise FD interest rates now as RBI increases repo rate?

Increase in EMIs on Rs 25 lakh-Rs 2 cr home loans with an outstanding tenure of 20 years (rate hike from 7.25% to 7.50%)

Outstanding amount	7.25%	7.50%	Increase in EMI
₹ 25 lakh	₹ 19,759.40	₹ 20,139.83	₹ 380.43
₹ 50 lakh	₹ 39,518.80	₹ 40,279.66	₹ 760.86
₹ 75 lakh	₹ 59,278.20	₹ 60,419.49	₹ 1,141.29
₹ 1 crore	₹ 79,037.60	₹ 80,559.32	₹ 1,521.72
₹ 1.25 crore	₹ 98,797.00	₹ 1,00,699.15	₹ 1,902.15
₹ 1.50 crore	₹ 1,18,556.40	₹ 1,20,838.98	₹ 2,282.58
₹ 1.75 crore	₹ 1,38,315.80	₹ 1,40,978.81	₹ 2,663.01
₹ 2 crore	₹ 1,58,075.20	₹ 1,61,118.64	₹ 3,043.44

Increase in EMIs on Rs 25 lakh-Rs 2 cr home loans with an outstanding tenure of 20 years (rate hike from 7.75% to 8%)

Outstanding loan amount	7.75%	8.00%	Increase in EMI
₹ 25 lakh	₹ 20,523.71	₹ 20,911.00	₹ 387.29
₹ 50 lakh	₹ 41,047.43	₹ 41,822.00	₹ 774.58
₹ 75 lakh	₹ 61,571.14	₹ 62,733.01	₹ 1,161.86
₹ 1 crore	₹ 82,094.86	₹ 83,644.01	₹ 1,549.15
₹ 1.25 crore	₹ 1,02,618.57	₹ 1,04,555.01	₹ 1,936.44
₹ 1.50 crore	₹ 1,23,142.28	₹ 1,25,466.01	₹ 2,323.73
₹ 1.75 crore	₹ 1,43,666.00	₹ 1,46,377.01	₹ 2,711.01
₹ 2 crore	₹ 1,64,189.71	₹ 1,67,288.01	₹ 3,098.30

How high home loan interest rates can impact your loans

Adhil Shetty, CEO, Bankbazaar, said, "For home loan borrowers, this will show up as a higher EMI or a longer tenure, depending on the lender. At 7.5% over 25 years, the monthly EMI could rise by about ₹490 on a ₹30 lakh loan, ₹654 on ₹40 lakh and ₹817 on ₹50 lakh. Over the full tenure, the extra interest comes to roughly ₹1.5 lakh, ₹1.96 lakh and ₹2.45 lakh."

Anuj Puri, chairman, ANAROCK Group, said, "The rate hike will put pressure on consumer sentiment and discretionary spending – this has a direct correlation to housing demand. The festive season is a key period for housing demand, and an increase in borrowing costs will affect buyer sentiment."

Atul Monga, CEO & Co-Founder, BASIC Home Loan, says, "To put the impact on borrowers in perspective, on a standard ₹50 lakh home loan with a 30-year tenure, a 25 bps rate increase lifts the monthly EMI by ₹852 at a PSU bank, from ₹34,109 to ₹34,961, and by ₹867 at a private bank, from ₹35,821 to ₹36,688."

Santosh Agarwal, CEO, Paisabazaar, says prospective homebuyers planning to take a new home loan should compare offers carefully, not just on the headline interest rate but also on the benchmark

"The lender’s spread over the benchmark and other charges. Those who are financially ready should not defer their purchase decision solely because of a rate hike.Home loans are typically long-tenure commitments, during which interest rates are likely to go through multiple cycles of increases and decreases," says Agarwal.

Raoul Kapoor, Co CEO, Andromeda Sales and Distribution, says if the entire 25-basis-point increase is passed on to borrowers, a home loan rate of 7.15% could increase to around 7.40%.

Santosh Agarwal, Executive Director & CFO, Alpha Corp Development Limited, says while the move could marginally impact borrowing costs and financing sentiment, he do not expect it to significantly disrupt the underlying momentum in the real estate sector.

The actual impact may vary depending on the lender, loan benchmark, borrower profile and whether the rate increase is adjusted through a higher EMI, a longer tenure, or a combination of both.

What should home loan borrowers do now

Shetty says that with the RBI saying cuts are off the table and the next step can only be a hike or a pause, borrowers should not plan around lower EMIs. "Many lenders extend the tenure to keep the EMI unchanged, which feels easier but costs more over time. Asking your lender how the change will be applied, and making a small prepayment each year can help limit the extra interest."

Monga says allocating annual savings or bonuses toward prepaying just one extra EMI each year can help offset the impact of the 25 bps hike.

How repo rate impacts home loan interest rates

The repo rate impacts home loan rates since it is the rate at which banks borrow money from the central bank. When the RBI increases the repo rate, banks get loans from it at a higher rate. Since banks spend more money on these high-rate loans, they transfer the increased costs to their borrowers by increasing interest rates on loans.

In India, most floating rate home loans are linked to external benchmarks like the repo rate. So, when the RBI increases the repo rate, these interest rates increase right away.

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Repo rate history

Effective Date	Repo Rate	% Change
07-10-2026	5.50%	0.25%
05-08-2026	5.25%	0.00%
05-06-2026	5.25%	0.00%
06-02-2026	5.25%	0.00%
05-Dec-25	5.25%	0.25%
06-Aug-25	5.50%	0.00%
06-Jun-25	5.50%	-0.50%
09-Apr-25	6.00%	-0.25%
07-Feb-25	6.25%	-0.25%
06-Dec-24	6.50%	0.00%
18-Sep-24	6.50%	0.00%
08-Jun-23	6.50%	0.00%
08-Feb-23	6.50%	0.25%
07-Dec-22	6.25%	0.35%

Source: RBI

What happens to MCLR-linked and fixed rate loan borrowers

Borrowers with home loans linked to the Marginal Cost of Funds-based Lending Rate (MCLR) experience a slower transmission of the repo rate hike 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 or the EMI.

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Lowest home loan rates: Private vs public vs HFCs

Lender	Rates
Private Banks
Federal Bank	7.35%
ICICI Bank	7.55%
Kotak Mahindra Bank	7.60%
HDFC Bank	7.75%
Axis Bank	8.00%
Public-sector Banks
Bank of Maharashtra	7.00%
Central Bank of India	7.00%
Bank of India	7.10%
Canara Bank	7.15%
Punjab National Bank	7.25%
Housing Finance Companies
LIC Housing Finance	7.15%
Bajaj Finserv	7.25%
Tata Capital	7.50%
PNB Housing Finance	7.75%
Aditya Birla Housing Finance	7.75%
Rates as advertised on respective lenders' website on Oct 2, 2026; Floating rates for loans up to Rs.30 lakh; Rate offered may vary based on eligibility and lender's policies; Compiled by BankBazaar.com

Are there ways to save money on a home loan after the hike?

Though many home loan borrowers will spend a higher amount on their EMIs, there are still ways to save interest on home loans in the future. Here are some of those strategies.

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 the 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.

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 rate if you have a good credit score, such as 700+, with a good repayment record.