The Reserve Bank of India’s (RBI) Monetary Policy Committee on April 8 kept the repo rate unchanged at 5.25%, signalling stability for current and prospective home loan borrowers. With EMIs set to remain steady, borrowers can plan their finances with greater certainty.
Real estate experts advise existing home loan borrowers to maintain a 6–9 month EMI buffer to navigate potential uncertainties. Prospective buyers should ensure EMIs remain within 30–40% of their monthly income to maintain financial stability.
Borrowers with repo-linked loans are already benefiting from the 125 basis points rate cuts since early 2025. On a ₹50 lakh, 20-year loan, this translates to an EMI reduction of about ₹3,050 per month and total interest savings of approximately ₹7.34 lakh. For a ₹75 lakh loan, the monthly savings are around ₹5,800, with total interest savings of nearly ₹13.94 lakh.
“A rate hold keeps these gains intact. Borrowers still on MCLR-linked products are not seeing this benefit automatically and should switch to a repo-linked loan without delay. Those paying 50 basis points or more above current market rates should explore refinancing now,” says Adhil Shetty, CEO, BankBazaar.
A Marginal Cost of Funds-based Lending Rate-linked home loan is a floating-rate loan whose interest rate is based on the bank’s internal base rate (MCLR) plus a margin. The rate changes periodically (not instantly) in response to bank revisions, affecting your EMI or loan tenure over time.
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What the RBI’s status quo on repo rates means for prospective homebuyers
Amit Verma, 36, a Pune-based professional, was planning to buy a home. Now that the RBI has kept the repo rate unchanged at 5.25%, he is focusing on affordability rather than timing decisions, keeping his EMI within permissible limits and focusing on a good credit score.
Prospective homebuyers cannot expect a lower home loan rate if they plan to buy a house. One cannot say whether one is at the bottom of the cycle, and there could be further rate easing. Also, a home-buying decision should not be solely based on the interest rate cycle. They need to plan the loan based on affordability rather than maximum eligibility, ensuring that EMIs remain within 30–40% of monthly income to maintain financial stability.
“Opting for a longer tenure can help keep EMIs comfortable, but borrowers should aim to make periodic prepayments whenever possible to reduce the overall interest burden. Maintaining a contingency fund equivalent to at least 6–9 months of expenses and EMIs is also advisable, especially given potential uncertainties in interest rate cycles,” advises Raoul Kapoor, co-CEO. Andromeda Sales and Distribution. One should also prepare for emergencies, such as job loss, because interest payments cannot be stopped.
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It is also important to fix your credit score first before you apply for a home loan. A credit score plays a crucial role in determining the interest rate offered on a home loan.and above, are seen as lower risk and usually qualify for the most competitive rates. If your credit score is poor, it’s best to work on improving it before applying for a home loan.
It is important to remember that buying a home is a long-term decision, and being on a strong financial footing is very important. “Additionally, buyers should assess how this new obligation fits into their current budget and whether it delays their other significant financial goals, such as retirement. It is important to read the terms regarding prepayment and foreclosure to ensure you have the flexibility to clear the debt early if your income increases,” says Abhishek Kumar, a Securities and Exchange Board of India (Sebi)-registered investment advisor (RIA), and founder and chief investment advisor of SahajMoney, a financial planning firm.
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What it means for existing homebuyers
Rajesh Mehta, 40, from Mysore, is planning to optimise his ₹75 lakh home loan with a 20-year tenure. He is scouting for lower rates and considering refinancing, as he is currently paying above prevailing market levels. He also plans to channel the savings into higher EMIs and make periodic prepayments to reduce tenure and overall interest outgo.
For existing borrowers, this is a good time to review loan terms and explore options such as balance transfer or rate renegotiation if they are paying higher interest rates. Increasing early-stage prepayments can significantly reduce the loan tenure and total interest outgo, he said.
“Additionally, borrowers should closely monitor any extension in tenure due to rate changes and maintain a strong credit profile to benefit from better refinancing opportunities in the future,” said Kapoor.
Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics.