There’s good news for home loan borrowers. The RBI has cut the repo rate for the third time in five months, reducing it by 50 basis points to 5.50%.
This will lead to a decrease in home loan EMIs, bringing relief to many borrowers who have been struggling with high monthly payments.
This move was widely expected by financial experts and economists.
MPC Took the Decision to Cut the Repo Rate
The RBI’s Monetary Policy Committee (MPC) meeting began on 4 June, and its decision was announced by Governor Sanjay Malhotra on 6 June at 10 AM.
As expected, the repo rate was reduced again this year. Malhotra stated that India’s economy remains strong despite global uncertainties, and this makes India attractive for foreign investors.
Repo Rate Now at 5.50%
The repo rate has been reduced to 5.50%, meaning that banks will lower interest rates on home and other loans. Both existing and new home loan customers will benefit.
The RBI has reduced the repo rate by 0.50% (50 bps), which is more than the 0.25% cut most experts had predicted.
Bigger Cut Than Expected
This cut in the repo rate is larger than anticipated, which means both old and new home loan borrowers will benefit significantly.
With a 0.50% reduction, banks and NBFCs are expected to quickly lower interest rates on home and auto loans.
Right now, many government banks charge between 7.75% and 9% on home loans. After the cut, the rate could drop to around 7.25%.
Repo Rate Cut by 1% in Just 5 Months
This is the third repo rate cut by the RBI this year. The first cut of 25 bps was in February, followed by another 25 bps cut in April.
Now, with the latest 0.50% cut, the repo rate has dropped from 6.5% to 5.5% in five months.
Here’s How You’ll Benefit
Banks and NBFCs will now be forced to lower interest rates, thanks to the 0.50% cut. If you have a floating rate home loan, your interest rate and EMI will automatically reduce.
But if your loan is on a fixed rate or your bank delays reducing the interest, you can consider transferring your loan to another bank that offers lower rates.
Planning to Take a Loan? Wait a Bit
If you haven’t taken a loan yet but plan to, it’s better to wait for a week or two. Banks are expected to reduce interest rates on home and other loans soon.
Once that happens, you can apply for a loan and benefit from lower rates. Usually, banks pass on rate cuts to new customers faster than to existing ones.
