Home loan borrowers linked to floating rates got a breather when the Reserve Bank of India (RBI) governor Sanjay Malhotra maintained the repo rate at 5.25% in the Monetary Policy Committee (MPC) meeting that concluded on Friday (June 5, 2025).
This marks the fourth straight MPC where the RBI has held the repo rate, which means many borrowers can continue to enjoy low home loan rates.
But with inflation on the rise, home loan borrowers may not stay happy for too long as a repo rate hike can’t be ruled out in the coming MPCs.
The good time for home loan borrowers started when the central bank slashed the repo rate by a total of 125 bps in 2025. Following suit, many banks also lowered interest rates on floating rate loans.
How long this favourable situation lasts depends on the RBI’s decision in the next few MPCs.
Adhil Shetty, CEO, BankBazaar, says the repo rate hold at 5.25% means no immediate change to EMIs on floating-rate home loans.
"Borrowers continue to benefit from the cumulative 125 basis points of rate cuts delivered since early 2025, which have significantly reduced borrowing costs. For illustration, the cumulative reduction translates to EMI savings of approximately Rs 3,050 per month on a Rs 50 lakh home loan with a 20-year tenure and about Rs 5,800 per month on a Rs 75 lakh loan of the same tenure.
Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt. Ltd., says the status quo on the repo rate means home loan interest rates are likely to remain stable at around 7%–7.25%, providing much-needed comfort to both existing borrowers and prospective homebuyers.
"Those currently servicing home loans can continue to benefit from lower EMIs compared to the high-interest-rate environment witnessed during 2022–24, while new borrowers can plan their home purchases with greater confidence and affordability," says Kapoor.
Sarbvir Singh, Joint Group CEO, PB Fintech, says for fintech lenders, rate stability is important because it preserves affordability for everyday borrowers — salaried professionals, self-employed individuals and small businesses that are highly sensitive to changes in monthly repayment obligations.
RBI Repo Rate (Brief history)
| Date | Repo rate (%) | Change (%) |
| 07-Feb-25 | 6.25% | -0.25% |
| 09-Apr-25 | 6.00% | -0.25% |
| 06-Jun-25 | 5.50% | -0.50% |
| 06-Aug-25 | 5.50% | 0.00% |
| 05-Dec-25 | 5.25% | 0.25% |
| 06-Feb-26 | 5.25% | 0.00% |
| 08-Apr-26 | 5.25% | 0.00% |
| 05-Jun-26 | 5.25% | 0.00% |
Factors like the repo rate and inflation impact home loan interest rates.
How repo rate impacts home loan interest rates
The repo rate impacts the home loan rates since it is the rate at which banks borrow money from the central bank. When the RBI reduces the repo rate, banks can get loans at a cheaper rate. Since banks save money with these lower-rate loans, they transfer these benefits to their borrowers by cutting interest rates on loans.
Most floating rate home loans are linked to external benchmarks like repo rate. So when the RBI cuts the repo rate, these interest rates drop right away.
On the other hand, borrowers with their home loans linked to Marginal Cost of Funds-based Lending Rate (MCLR), experience a slower transmission of the repo rate cut into their loan EMIs. As far as borrowers with fixed interest rate loans are concerned, their loans are not linked to the repo rate and there is no change in their interest rates.
The opposite happens when the Central Bank raises the repo rate. Banks typically increase their home loan rates, resulting in a higher EMIs for borrowers with repo rate-linked loans.
Currently, since the RBI hasn’t changed the repo rate since December 2025, banks are keeping their home loan rates steady, as the impact of previous repo rate changes have already been felt.
However, right now, rising fuel and gas prices, increased input costs and a declining currency are creating inflationary pressure. The Iran-US and Israel-Lebanon conflicts have further aggravated fears of inflation. So, a future repo rate hike is possible, which may compel banks to raise loan rates.
10 lowest home loan interest rates (for above Rs 30 lakh to up to Rs 75 lakh amount)
| Lender | Interest Rate (% p.a.) |
| Bank of India | 7.10% onwards |
| Bank of Maharashtra | 7.10% onwards |
| Indian Overseas Bank | 7.10% onwards |
| Central Bank of India | 7.10% onwards |
| Union Bank of India | 7.15% onwards |
| UCO Bank | 7.15% onwards |
| Indian Bank | 7.15% onwards |
| LIC Housing Finance | 7.15% onwards |
| Bank of Baroda | 7.20% onwards |
| Punjab National Bank | 7.20% onwards |
Source: Paisabazaar
How inflation can impact home loan rates in the future
In India, fuel and energy prices have surged due to supply disruptions from the Israel-Iran conflict. It led to an increase in prices of many household items. The Rupee’s value fell against the US Dollar, increasing India’s import bills. Inflation in India has jumped from 2.74% in January to 3.48% in April with expectations of an even higher rate in May. These factors suggest that the RBI may raise the repo rate in future MPCs. If that happens, banks will raise repo rate-linked home loan rates.
For now, EMIs of repo rate-linked loans won’t get costlier but we can’t rule out a rate hike in the near future. But, there are still ways to save the interest on home loans in the future. Here, we will discuss some of those strategies.
Home loan prepayment
Prepayment is an effective strategy for trimming a home loan interest, tenure or both. One can opt for prepaying a percentage of the home loan, a fixed amount or extra EMI(s) every year.
Banks allow borrowers to make a prepayment at any stage of the loan, but borrowers can save a higher amount if they prepay the loan in its early stage. When a borrower prepays a home loan, the lender provides them with two options- they can either reduce the EMI and maintain the same tenure or they can keep the same EMI with a reduced tenure.
After the prepayment, if a borrower chooses to go for a reduced EMI, the loan tenure remains the same, but there are good savings on interest amount.
If the borrower wants to maintain the same EMI amount after making a prepayment, they can save more on interest and the loan tenure can also be reduced. The interest saved in this scenario is significantly greater compared to when a borrower opts to reduce the EMI amount.
Let’s see how much interest and time you can save in different prepayment conditions. Our calculations will show only conditions where you choose to keep the EMI the same as before prepayment.
Interest and tenure saved when you make one-time prepayment of loan
Let’s assume your home loan outstanding principal is Rs 50 lakh, the remaining tenure is 20 years, and the interest rate is 8%. If you choose to make a one-time prepayment of Rs 5 lakh (10% of principal), you will save Rs 15.85 lakh in interest and four years and one month (49 months) in tenure.
One-time prepayment calculations for different outstanding loan amounts
| Outstanding principal amount | Outstanding tenure (years) | Interest rate (%) | Prepayment amount (10% of principal) | Interest saved (Rs) | Tenure saved (months) |
| Rs 50 lakh | 20 | 8 | Rs 5 lakh | Rs 15.85 lakh | 49 |
| Rs 60lakh | 20 | 8 | Rs 6 lakh | Rs 19.01 lakh | 49 |
| Rs 70 lakh | 20 | 8 | Rs 7 lakh | Rs 22.18 lakh | 49 |
| Rs 80 lakh | 20 | 8 | Rs 8 lakh | Rs 25.36 lakh | 49 |
| Rs 90 lakh | 20 | 8 | Rs 9 lakh | Rs 28.53 lakh | 49 |
| Rs 1 crore | 20 | 8 | Rs 10 lakh | Rs 29.10 lakh | 49 |
Interest and tenure saved when you make more than one prepayment
If you don’t want to make a one-time payment equal to 10% of the principal amount, but prepay that amount in three equal instalments, you can still save Rs 14.51 lakh in interest and 46 months (3 years and 10 months) in tenure on the same Rs 50 lakh loan outstanding principal amount.
- Loan outstanding- Rs 50 lakh
- Outstanding tenure- 20 years
- Interest rate- 8%
- Prepayment amount- Rs 5 lakh (10% of principal in three equal instalments of Rs 1,66,666 each)
- Prepayment dates- 1 st prepayment (April 2026), 2 nd prepayment (April 2027), 3rd prepayment (April 2028).
- Interest saved- Rs 14.51 lakh
- Tenure saved- 46 months (3 years and 10 months)
| Outstanding principal amount | Outstanding tenure (years) | Interest rate (%) | Prepayment amount (in 3 instalments) | Interest saved (Rs) | Tenure saved (months) |
| Rs 50 lakh | 20 | 8 | Rs 5 lakh | Rs 14.51 lakh | 46 |
| Rs 60 lakh | 20 | 8 | Rs 6 lakh | Rs 17.41 lakh | 46 |
| Rs 70 lakh | 20 | 8 | Rs 7 lakh | Rs 20.31 lakh | 46 |
| Rs 80 lakh | 20 | 8 | Rs 8 lakh | Rs 23.21 lakh | 46 |
| Rs 90 lakh | 20 | 8 | Rs 9 lakh | Rs 26.12 lakh | 46 |
| Rs 1 crore | 20 | 8 | Rs 10 lakh | Rs 29.01 lakh | 46 |
Interest and tenure saved when you pay one extra EMI each year
The third condition can be when you choose to prepay one extra EMI each year. On the same Rs 50 lakh outstanding principal amount, if you prepay one extra EMI each year, you can save Rs 10.17 lakh in interest and 3 years and 5 months (41 months) in tenure.
- Outstanding home loan principal amount- Rs 50 lakh
- Outstanding tenure- 20 years
- Interest rate- 8%
- Prepayment amount- one extra EMI of Rs 41,822 each year
- 1st extra EMI prepayment month- April 2026
- Interest saved- Rs 10.17 lakh
- Tenure saved- 41 months (3 years and 5 months)
Prepayment calculations for different amounts of loan (when you pay 1 extra EMI each year)
| Outstanding principal amount | Outstanding tenure (years) | Interest rate (%) | Extra EMI amount to be paid every year | Interest saved (Rs) | Tenure saved (months) |
| Rs 50 lakh | 20 | 8 | Rs 41,822 | Rs 10.17 lakh | 41 |
| Rs 60 lakh | 20 | 8 | Rs 50,186 | Rs 12.21 lakh | 41 |
| Rs 70 lakh | 20 | 8 | Rs 58,511 | Rs 14.24 lakh | 41 |
| Rs 80 lakh | 20 | 8 | Rs 66,915 | Rs 16.28 lakh | 41 |
| Rs 90 lakh | 20 | 8 | Rs 75,280 | Rs 18.31 lakh | 41 |
| Rs 1 crore | 20 | 8 | Rs 83,644 | Rs 20.34 lakh | 41 |
Refinancing of home loan
Refinancing is another way to save interest on your home loan. In refinancing, you choose a new lender which settles the dues of your loan with the existing lender and takes over the outstanding loan. A new lender can offer a lower interest if you have a good credit score such as 700+ with a good repayment record.
If you have Rs 50 lakh outstanding principal for 20 years at 8.5% interest rate, and the new lender offers you a 7.5% interest rate, in 20 years, you can save Rs 7.47 lakh.
Interest saved on different amounts of home loans due to refinancing
| Outstanding principal amount | Outstanding tenure (years) | Current interest rate | Interest rate after refinancing | Amount saved due to refinancing |
| Rs 50 lakh | 20 | 8.50% | 7.50% | Rs 7.47 lakh |
| Rs 60 lakh | 20 | 8.50% | 7.50% | Rs 8.96 lakh |
| Rs 70 lakh | 20 | 8.50% | 7.50% | Rs 10.45 lakh |
| Rs 80 lakh | 20 | 8.50% | 7.50% | Rs 11.95 lakh |
| Rs 90 lakh | 20 | 8.50% | 7.50% | Rs 13.44 lakh |
| Rs 1 crore | 20 | 8.50% | 7.50% | Rs 14.94 lakh |
