What RBI’s Decision to Hold Repo Rate Means for Home Loan Borrowers?

The Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 5.5 percent as of October 1, 2025. For home loan borrowers, this means no immediate change in equated monthly installments (EMIs) or interest rates. The decision follows a series of earlier cuts between February and June, when the repo rate was lowered by 100 basis points, giving borrowers access to some of the lowest home loan rates in years.

Impact on Borrowers

Since October 2019, floating-rate retail loans such as home loans have been linked to external benchmarks, most commonly the repo rate. This means that any change in the repo rate directly affects the interest rate on these loans. With the rate held steady, borrowers will continue paying the same EMIs.

When repo rates are reduced, banks usually shorten loan tenures if EMIs remain unchanged. Conversely, when rates rise, borrowers are offered the option of paying higher EMIs, extending the tenure, or a mix of both. For now, stability in the repo rate brings predictability for existing borrowers.

How Rate Cuts Have Helped?

Earlier cuts have already benefited many. For example, a borrower with a ₹50 lakh home loan over 20 years at 8.5 percent interest would save significantly after the 100-bps reduction. The loan tenure would reduce by nearly 16 months, translating into savings of over ₹15 lakh in interest if EMIs remain the same. Choosing to reduce EMIs instead would still result in savings, though on a smaller scale.

Current Home Loan Rates

Leading banks, including State Bank of India, HDFC Bank, ICICI Bank, Canara Bank, and Bank of Baroda, are currently offering home loans starting from 7.3 to 8 percent. These rates remain competitive, with lenders vying to attract new borrowers through festive discounts and waivers.

Festive Season Offers

Banks have introduced festive offers to make loans more attractive. For instance, Bank of Maharashtra is offering home loans at 7.35 percent with zero processing fees. Axis Bank and HDFC Bank have introduced rates starting at 7.40 percent, while Bank of Baroda offers loans beginning at 7.45 percent with reduced processing charges.

ICICI Bank has set processing fees at ₹5,000 plus taxes for salaried applicants, and IndusInd Bank has extended repayment periods of up to 30 years.

Read more:RBI Eases Rules to Allow Banks to Finance Acquisitions 

Difference Between New and Existing Borrowers

Public sector banks have passed on the benefit of earlier repo rate cuts to new borrowers by reducing home loan rates by about 100 basis points. Some private banks, however, have adjusted their spreads over the repo rate instead of fully transferring the cuts, resulting in smaller reductions for fresh loans.

Existing borrowers with loans at higher rates continue to pay more compared to those with new repo-linked products. The unchanged repo rate means their payments will remain steady, ensuring short-term relief, but long-term costs depend on how future rate movements play out.

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