No cut in repo rate by RBI: Here's how can you still save big on home loan EMIs

Your repo rate-linked home loan equated monthly instalment (EMI) is likely to remain unchanged as the Reserve Bank of India (RBI) has maintained the repo rate at 5.25% at the end of its three-day Monetary Policy Committee (MPC) meeting concluded today (February 6, Friday).This pause came after the central bank cut the repo rate by 25 bps in its last meeting in December 2025.

The most immediate advantage of repo rate cut is experienced by borrowers whose home loans are tied to external benchmarks, particularly the Repo Linked Lending Rate (RLLR). When the RBI lowers the repo rate, lenders typically respond by cutting home loan rates, which allows borrowers to save money in interest payments. This occurred after the central bank reduced the repo rate by 125 bps last year.

Adhil Shetty, CEO, BankBazaar, says borrowers can now continue to optimise savings by retaining higher EMIs to compress loan tenures and reduce total interest costs.


"Balance transfer opportunities and loan restructuring options also remain relevant for those seeking incremental efficiencies," says Shetty.

Vikas Bhasin, managing director, Saya Group, says with home loan rates currently hovering around an affordable and comfortable level of approximately 7.5%, and expected to remain below 8% for an extended period, borrowing conditions remain supportive for residential purchases.

Piyush Bothra, CFO and co-founder, Square Yards, says with the December 25 basis points cut still awaiting full transmission, the focus now shifts to effective pass through by banks.

"Policy stability at this stage is positive for housing demand and overall sentiment, but its real significance will lie in how quickly borrowers experience lower lending rates on the ground."

Pradeep Aggarwal, founder & chairman, Signature Global (India) Ltd., says the RBI’s decision to hold the repo rate steady at 5.25% offers stability for interest-rate–sensitive sectors like real estate in the current macroeconomic environment.

What stopped RBI from reducing rate this time

The RBI didn't cut the repo rate for reasons including controlled inflation, competitive high rates from small savings schemes and other high interest rate deposit options. Despite multiple rate 10-year government security (G-Sec) bond yield already has not fallen to the extent of repo rate cut and is hovering around 6.651%. Lenders are facing challenges in garnering deposit at lower rates which is reflected in slow deposit growth. In this context, it was challenging for the RBI to go for a rate cut.

Will there be a rate cut in future?

Though the RBI took a pause this time around, we cannot rule out cutting the rate in the future if inflation, competitive interest rates and 10-year bond yields change. So, when the central bank cuts the repo rate, lenders will be able to lower the interest rates on home loans as well. This indicates that borrowers still have an opportunity to save money on their loans.

How you can save on home loans despite no change in repo rate?

Though there will be no change in repo rate-linked loans after the RBI pauses the repo rate, there are many borrowers who are still sticking to loans linked to Marginal Cost of Funds-based Lending Rate (MCLR), base rate and Benchmark Prime Lending Rate (BPLR), where the transmission of previous repo rate cuts is slow. There are also chances that the loans of these borrowers are at higher rates compared to repo-linked loans. If that's the case, these borrowers should compare their loan rates with repo-linked rates and shift to repo-linked rate loans.

Even though lenders won’t cut home loan rates now because there’s no change in repo rate, there are still a lot of ways using which borrowers can save a substantial amount of money, loan tenure or both. Let’s find out:

Switching the loan regime

You can switch from one loan regime to another within a bank to reduce the interest amount. For example, if you are paying a 1% higher rate in your MCLR-linked loan compared to the repo-linked loan, you can request your lender to make a switch to the loan offering a lower rate.

The lender, after charging a nominal fee, should allow you to make a switch. You should also know that the loan regime change option is available only if you have taken your home loan from a bank. For loans taken from a Non-Banking Finance Company (NBFC), the option of switching the regime is not available. However, in that case, you have the option of getting your loan refinanced from a bank or a NBFC.

Refinancing of home loan

Refinancing is another way you can save on 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 of 700+ with a good repayment record.

If you have Rs 50 lakh outstanding principal for 20 years at 8.5% interest rate, and 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	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

Home loan prepayment

Prepayment is an effective strategy for trimming a home loan interest, tenure or both. One can choose prepaying a percentage of the loan, a fixed amount or extra EMI(s) every year. A borrower can make a prepayment at any stage of the loan, but they can save a higher amount if they prepay the loan in its early years. When a borrower prepays a home loan, the lender gives them two options- they can either trim the EMI about or keep it the same.

If a borrower chooses to trim the EMI amount, the loan tenure remains the same, but there can be savings on interest amount.

If the same borrower chooses to keep the EMI amount the same as before the prepayment, then both interest amount and loan tenure can be saved. The interest saved in such a stage is higher than when the borrower chooses to reduce the EMI amount.

Repo rate: A brief history

Date	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%

Let’s see how much interest and time you can save under different prepayment conditions. Our calculations will show only conditions when you choose to keep the EMI the same as before prepayment.

Interest and tenure saved when you make one-time prepayment

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.

• Outstanding principal- 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- 1^st prepayment (February 2026), 2^nd prepayment (February 2027), 3rd prepayment (February 2028).
• Interest saved- Rs 14.51 lakh
• Tenure saved- 46 months (3 years and 10 months)

Prepayment calculations for different amounts of loan (when prepayment is 10% of outstanding principal but made in 3 equal instalments)

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 60lakh	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
• 1^st extra EMI prepayment month- February 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

Frequently asked questions (FAQs) about home loan and repo rate relation (as explained by Atul Monga, CEO & Co-Founder, BASIC Home Loan). How does the RBI repo rate influence home loan rates?

When the RBI changes the repo rate, it directly impacts the bank’s borrowing costs, which are passed on to home loan rates. A rate cut lowers loan EMIs, improves affordability and encourages fence-sitters to enter the housing market. On the other hand, a rate hike increases borrowing costs and can slow down the loan demand. With most of the home loans now linked to external benchmarks, transmission is much faster and more transparent. Stable rates can support long-term financial planning, strengthening housing demand and economic momentum.

Which home loans get the quickest benefit, which are the slowest?

Home loans linked to external benchmarks, especially those tied to the RBI repo rate, see the quickest transmission, with rate changes typically reflecting within three to four months.

Loans linked to older benchmarks such as Marginal Cost of Funds-based Lending Rate (MCLR) or the base rate adjusts slowly. Their reset cycles are comparatively longer, and transmission depends on the bank's internal cost structures, which delays transmission of rate cuts or hikes.

Is the previous transition of RBI repo rate cuts on home loan rates over?

The transmission of earlier RBI repo rate cuts is largely complete for home loans linked to external benchmarks, with borrowers already witnessing quicker adjustments. However, the impact is still playing out for MCLR-linked loans owing to longer-reset cycles. Going forward, the focus will shift from transmission to rate stability. A predictable interest rate environment is important to sustain housing demand, improve affordability and enable borrowers to plan long-term financial commitments with confidence.

What should home loan borrowers do if RBI cuts repo rate and lenders also cut home loan rates?

Borrowers should review their loan terms when interest rates decline. First, verify if the loan provider has passed on the benefit, specially for repo-linked loans where transmission is faster.

Keeping EMIs unchanged while reducing the loan tenure can result in interest savings. Those on older benchmarks should assess balance transfers after factoring all related costs. Using the rate cycle wisely can implicitly improve long-term financial stability.