How much will your home loan EMI drop after RBI's 50 basis points repo rate cut?

New Delhi, June 6 If you have a home loan, your EMI is set to reduce by over Rs 1,500 a month thanks to the Reserve Bank of India’s latest move.

With the central bank cutting the repo rate by 50 basis points -- from 6 per cent to 5.5 per cent -- banks are expected to lower interest rates on loans.

For a Rs 50 lakh home loan over 20 years, this could mean monthly savings of Rs 1,569 and annual savings of nearly Rs 19,000, offering much-needed relief to borrowers amid high living costs.

The repo rate is the interest rate at which the RBI lends money to commercial banks. A reduction in this rate makes borrowing cheaper for banks, which in turn allows them to offer loans to customers at lower interest rates.

This directly impacts borrowers, especially those with home loans linked to repo-based lending rates (RBLR).

Let’s break this down with a practical example. Suppose you have a home loan of Rs 50 lakh at an interest rate of 8.5 per cent for a tenure of 20 years.

Your monthly EMI in this case would be around Rs 43,391. Now, after the 50 basis points cut in the repo rate, if the bank reduces your interest rate to 8 per cent, your new EMI would come down to approximately Rs 41,822.

Gaurav Gupta, Secretary of CREDAI (Confederation of Real Estate Developers’ Associations of India), welcomed the RBI’s monetary decision, saying that the rate cut will help reduce borrowing costs for home buyers. Beyond just lowering monthly payments, it will improve housing affordability across the country.

He further added that a drop in interest rates not only benefits individual buyers but also boosts overall sentiment in the real estate sector, which positively impacts multiple industries connected to it.

Importantly, it's not just home loans that will get cheaper -- personal loans, auto loans, and other types of retail borrowing will also see reduced EMIs as a result of lower interest rates.

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