RBI's rate pause: Best chance to lock cheaper home loans and stable EMIs

With RBI keeping repo rate unchanged, experts explain how borrowers can refinance loans and save on EMIs

RBI MPC: The Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 5.5 per cent, a move welcomed by developers and financial advisors who believe it will maintain homebuyer confidence amidst global trade tensions.

 

The announcement came after the Monetary Policy Committee (MPC) meeting on Wednesday. In the previous meeting in June, the RBI had cut rates by 50 basis points as inflation softened.

 

“A rate cut would have certainly benefitted the affordable housing segment, which has been under pressure for years,” said Anuj Puri, chairman, ANAROCK Group.

 

According to ANAROCK data, average residential prices across India’s top seven cities have surged by 39 per cent in the past two years—from ₹6,470 per sq. ft. in Q2 2023 to ₹8,990 per sq. ft. in Q2 2025. The affordable segment is feeling the squeeze, as global trade tensions and tariffs from the Trump administration weigh down on MSMEs, the primary buyers in this segment.

 

 

“That said, homebuyers today are more influenced by long-term confidence than immediate rate moves. With the festive season approaching, developers are likely to offer deals and flexible payment plans to maintain momentum,” Puri added.

 

Is it the right time to buy a house?

 

Yes, according to experts.

 

“For those financially prepared, this could be a good time to buy a house. Stable rates bring predictability, which helps with financial planning. However, buying property should always align with personal financial goals rather than market sentiment,” said Krishan Mishra, CEO, FPSB India.

 

Adhil Shetty, CEO of BankBazaar.com, said, “As RBI Governor Sanjay Malhotra mentioned, past rate cuts have already been passed on to borrowers. Despite the repo rate being unchanged at 5.5 per cent, banks have lowered fresh home loan rates by up to 71 basis points since February. Today, top credit borrowers can access home loans below 8 per cent, a level we last saw during easing cycles.”

 

“For first-time buyers, this improves affordability. For those upgrading, it’s an ideal time to refinance a high-interest loan. But as credit becomes cheaper, developers might firm up prices. Inflation is expected to rise next year, so it’s a window worth considering with careful timing,” Shetty added.

 

What should existing home loan borrowers do now?

 

“Home loan rates for top credit profiles have dipped below 8 per cent, especially for balance transfers. If your loan is priced higher, consider switching to a repo-linked rate. Refinancing now can lower EMIs and reduce your total interest payout,” said Shetty.

 

Krishan Mishra, CEO of FPSB India added, “Borrowers with floating rates should review their loan terms now. It’s a good time to make part prepayments or refinance if better terms are available. Aligning large credit decisions with overall life goals and financial security is key.”

 

Adil Altaf, managing director of Trinity Infra, said, “This decision ensures stable home loan EMIs, offering predictability for borrowers.”

 

Rakesh Malhotra, founder and chairman of PRIME Developments, said, “It remains an attractive time to buy a home, as stable rates ease EMI planning. Buyers can act confidently, taking advantage of current rate levels and exploring competitive offers from lenders.”

 

Will banks reduce home loan rates after this decision?

 

“While the RBI has kept rates unchanged, banks still have room to cut lending rates. Liquidity remains in surplus, and the 100 bps CRR cut announced earlier will further improve conditions. With festive demand coming up, banks may lower rates marginally to attract borrowers,” said Shetty.

 

“We’re already seeing some public sector banks initiate this. Private banks will likely follow,” he added.

 

Mahendra Nagaraj, vice president, M5 Mahendra Group, said, “While a rate cut would have further stimulated demand, the RBI’s steady approach strengthens sectoral stability. This policy lays a solid foundation for growth, market consolidation, and renewed investor confidence.”

 

Arsh Mogre, economist at PL Capital, explained the long-term benefit of future rate cuts. “If home loan rates reduce by 100–125 basis points over time, a ₹50 lakh loan at 10 per cent for 20 years would see EMIs drop from ₹48,251 to ₹43,391. That’s a monthly saving of nearly ₹4,900, adding up to ₹11.7 lakh over the loan’s tenure.”

 

What steps can borrowers take now?

 

1. Check whether your loan is repo-linked or MCLR/base rate

2. If you’re paying higher interest, consider switching to a repo-linked loan

3. Compare rates across banks, especially if you have a strong credit score

4. Think about part-prepaying your loan to reduce interest burden

5. Maintain a good credit score to get better offers

 

“Those still on MCLR or base rate loans should consider switching to repo-linked loans for quicker benefits,” said Shetty. “Part-prepaying during a low-rate environment can significantly reduce your overall interest and loan tenure.”