RBI Cuts Repo Rate: Home Loan Interest Rates Drop, Bringing Relief to Borrowers
6 Banks Cut: The Reserve Bank of India (RBI) has slashed the repo rate by 25 basis points (0.25%) during its Monetary Policy Committee (MPC) meeting on February 7, 2025. This reduction brings the repo rate down to 6.25%, marking the first rate cut in two years. As a result, home loan borrowers can expect lower interest rates, with several banks already announcing reductions in their lending rates.
Major Banks Lower Home Loan Interest Rates
Following the RBI’s decision, leading banks have revised their home loan interest rates to make borrowing more affordable. Among them, Canara Bank, Punjab National Bank (PNB), Union Bank of India, and Bank of Baroda have reduced their Repo Linked Lending Rate (RLLR) by 0.25%, benefiting home loan customers.
Understanding the Repo Linked Lending Rate (RLLR)
The RLLR is the interest rate at which banks lend to customers, and it is directly tied to the RBI’s repo rate. Since October 2019, the RBI has mandated banks to link their retail loans to an external benchmark rate (E-BLR), making the repo rate a key factor influencing loan rates.
For borrowers with floating-rate home loans, the RLLR determines their interest rate. When the RBI lowers the repo rate, these borrowers benefit through lower EMIs or a reduced loan tenure, depending on their financial goals.
Banks That Have Reduced Interest Rates
Canara Bank
- New RLLR: 9.00% (Reduced from 9.25%)
- Effective Date: February 12, 2025
- Applies to new accounts and those completing three years under the RLLR system.
Bank of Baroda
- New Rate: 8.90% (Baroda Repo Linked Lending Rate – BRLLR)
- Effective Date: February 10, 2025
Bank of India
- New RLLR: 9.10% (Reduced from 9.35%)
- Effective Date: February 7, 2025
Impact on Home Loan Borrowers
With lower home loan interest rates, borrowers have an excellent opportunity to reduce their financial burden. Here’s what this means:
Lower EMIs
A reduced interest rate translates into smaller monthly installments, making home loan repayments more affordable.
Option to Reduce Loan Tenure
Instead of lowering EMIs, borrowers can choose to keep their EMI amount unchanged and shorten the loan tenure, ultimately saving on total interest paid over time.
More Affordable New Home Loans
6 Banks Cut: For those planning to buy a home, this is the perfect time to secure a loan at a lower interest rate, making homeownership more accessible.
More Banks Join in Reducing RLLR
Union Bank of India
- New RLLR: 9.00% (Reduced from 9.25%)
- Effective Date: February 11, 2025
Indian Overseas Bank (IOB)
- New RLLR: 9.10% (Reduced from 9.35%)
- Effective Date: February 11, 2025
Punjab National Bank (PNB)
- New RLLR: 9.00% (Reduced from 9.25%)
- Effective Date: February 10, 2025
What Should Borrowers Do?
If you’re looking to take advantage of these reduced home loan rates, here’s what you can do:
- Compare Interest Rates: Different banks offer varying rates, so compare them to find the best deal.
- Consider Refinancing: If you already have a home loan, refinancing with a lower rate could save you money.
- Evaluate Loan Tenure: Decide whether to reduce EMIs or opt for a shorter tenure to save on interest.
- Check Eligibility: Ensure you meet the eligibility criteria for new loan offers.
Final Thoughts
The RBI’s repo rate cut has come as a boon for home loan borrowers, making homeownership more affordable and reducing financial stress. With major banks slashing their interest rates, now is a great time to explore home loan options and secure a favorable deal.
If you’re planning to buy a home or refinance an existing loan, act now to make the most of these lower rates!
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