Relief for home loan borrowers as RBI cuts repo rate by 25 basis points

In a major relief for borrowers, the Reserve Bank of India (RBI) has announced a 25 basis point cut in the repo rate, bringing it down from 6.50% to 6.25%. This marks the first such reduction in five years, as declared by newly appointed RBI Governor Sanjay Malhotra. The move is expected to lower the cost of home, car, and personal loans, easing the financial burden on consumers.

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The decision comes amid efforts to strengthen the economy, which Malhotra assured remains robust. By reducing lending rates, the central bank aims to support growth while making borrowing more affordable.

How much will borrowers save?

For home loan borrowers, the reduction translates into significant savings. A borrower with a ₹20 lakh home loan at an 8.5% interest rate over 20 years would previously pay an EMI of ₹17,356. With the rate cut, the EMI drops to ₹17,041, saving ₹315 per month.

For a ₹30 lakh loan, the EMI reduces from ₹26,035 to ₹25,562, resulting in monthly savings of ₹473.

A ₹50 lakh home loan borrower will see the biggest relief, with their EMI decreasing from ₹43,391 to ₹42,603, saving ₹788 every month.

This rate cut is expected to boost demand in the housing and automobile sectors while offering much-needed relief to existing loan holders.