Home Loan Update: The RBI’s recent repo rate cuts are beginning to show their impact on home loan interest rates.
Many banks have now brought their home loan rates below 8%. Public Sector Banks (PSUs) have responded quickly, cutting interest rates for both new and existing customers, bringing relief especially to those already repaying loans.
Borrowers were waiting for their EMIs to decrease, and this move has come as a welcome change.
RBI Reduced Repo Rate Twice in 2025
This year, the Reserve Bank of India (RBI) reduced the repo rate twice:
February: Cut by 25 basis points
April: Another 25 basis points cut
This brought the repo rate down from 6.5% to 6%. Despite this, some banks have not reduced their home loan rates yet, and the reason remains unclear.
Rates Should Have Dropped for Everyone
According to Vipul Patel, founder of MortgageWorld, some banks have increased the spread on loans. As a result, new home loan customers have not fully benefited from the lower repo rates.
RBI guidelines clearly state that existing borrowers must receive the full benefit of any reduction in repo rate. But it’s concerning that some banks haven’t followed through, even after two rate cuts.
Private Banks Yet to Pass on the Benefit
In January 2025, ICICI Bank was offering home loans at 8.75%. Despite two repo rate cuts since then, ICICI has not lowered its rates.
Axis Bank has also not reduced its home loan interest rates.
On the other hand, HDFC Bank has cut rates by 25 basis points.
This data comes from BankBazaar as of May 9.
Banks Follow Their Own Policies
Adil Shetty, CEO of BankBazaar, said that banks adjust their home loan rates based on internal policies and business priorities.
This time, government banks were faster in offering the benefits to customers.
Anuj Kesarwani, founder of Zenith Finserv, added that many PSU banks have passed on the full benefits of the rate cuts. In contrast, private banks have been slower to act.
