RBI rate cut: Home loan borrowers can save Rs 4.20 lakh on Rs 50 lakh loan

Borrowers are on a roll! Just a week ago, Finance Minister Nirmala Sitharaman announced zero income tax for those with income up to Rs 12 lakh, increased TDS limits on rental income, and increased home loan interest deductions. Now, the Reserve Bank of India (RBI) has cut the repo rate (RR) by 25 basis points (bps) to 6.25 per cent from 6.5 per cent.  With this, home loan borrowers will see major savings, as their EMIs are set to reduce with lower interest rates.

 

How does it impact the EMIs of borrowers?  

 

For home loan borrowers, the rate cut translates into significant savings.  

 

 

"For instance, if you have a 20-year home loan at an interest rate of 8.75% and have already paid 12 EMIs by March, the 25 bps rate cut effective from April will result in interest savings of Rs 8,417 per lakh. On a Rs 50 lakh loan, this amounts to savings of Rs 4.20 lakh over the loan tenure, with 10 EMIs being reduced, assuming all other parameters remain constant," explains Adhil Shetty, CEO of Bankbazaar.com.  

 

Borrowers with strong credit scores can explore more aggressive payment options, such as refinancing to a rate that is 50 bps or lower.  

 

"For example, refinancing to an 8.25% rate while keeping the EMI constant could lead to per-lakh savings of Rs 14,480 over the remaining loan tenure, translating to nearly 15% savings per lakh—a substantial benefit.  

 

Additionally, if the rate cut takes effect from April 1, borrowers can expect per-lakh interest savings of Rs 3,002 for the remainder of the year. On a Rs 50 lakh loan, this means savings of Rs 1.50 lakh in the second year alone," Shetty explained.  

 

Combining tax savings with loan benefits  

 

When these savings are viewed alongside the income tax exemptions introduced in the Union Budget 2025, the financial benefits become even more pronounced. Under the new tax regime, individuals with taxable income up to Rs 12 lakh are exempt from paying taxes. For someone earning a gross salary of Rs 25 lakh, the tax savings could amount to Rs 1.14 lakh annually. Combined with the Rs 1.50 lakh interest savings on a Rs 50 lakh home loan, the total savings for the year would be Rs 1.37 lakh, or approximately Rs 11,461 per month.

 

"Acting quickly to lock in favourable rates can lead to significant long-term savings and a smart real estate investment before any market fluctuations occur," he said.

 

"The rate cut, coupled with the government’s recent tax slab revisions, enhanced TDS limits on rental income, and increased home loan interest deductions, directly impacts the housing sector by boosting affordability and increasing disposable income for homebuyers. These measures will not only improve homeownership sentiment but also strengthen demand across residential segments," said Amit Jain, Chairman and Managing Director, Arkade Developers Limited.  

 

"RBI's decision to reduce the repo rates by 25 bps piggybacks on the recent taxation benefits announced in the Union Budget. As such, it is undeniably a major boost to the homebuyers, particularly for affordable housing buyers. Many first-time homebuyers who had been hesitating to take the plunge are likely to make their move now as home loan rates will reduce - as long as banks pass on the key benefits to buyers," said Anuj Puri, Chairman - ANAROCK Group.  

 

What must home buyers do?  

 

"Homebuyers should take advantage of lower home loan interest rates, which will reduce EMIs and ease financial burdens. Prospective buyers can compare loan offers from banks and financial institutions to secure the best deal. Those with existing loans may consider refinancing to benefit from the lower rates. With demand for housing expected to rise, this is also a great time to explore property investment opportunities," said Manju Yagnik, Vice Chairperson of Nahar Group and Senior Vice President of NAREDCO- Maharashtra.  

 

When do repo rate cuts get implemented?  

 

The implementation of an RBI repo rate cut in banking interest rates depends on individual bank policies. Normally, it takes anywhere from a few days to a couple of weeks for banks to adjust their lending and deposit rates, including those for loans and fixed deposits.  

 

After an RBI rate cut, banks evaluate their cost of funds, liquidity position, and market competition before deciding on rate adjustments.  

 

"For example, the repo rate cut may lead to lower interest rates on home loans, car loans, and personal loans, as well as deposits, but the exact timing and extent of the reduction can vary. Banks may implement these changes in phases rather than immediately. Larger banks usually move faster, while smaller banks may take longer to revise their rates," said Adhil Shetty, CEO of Bankbazaar.com.