Interest Unveiled: How Repo Rate Shifts Shape Your Home Loan EMIs!


The repo rate is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks. When the repo rate increases, it becomes more expensive for banks to borrow money, which means they have to charge higher interest rates on loans to their customers. This includes home loans.

So, if the repo rate increases, your home loan EMIs will also increase. The amount of increase will depend on the lending rate of your bank and the terms of your loan. However, you can expect your EMIs to go up by 2-4% for every 25 basis points (bps) increase in the repo rate.

For example, if your repo rate is 6.50% and your bank’s lending rate is 8%, and you have a home loan of Rs. 30 lakhs for 20 years, your EMI will be Rs. 24,392. If the repo rate increases by 25 bps to 6.75%, your bank’s lending rate will also increase to 8.25%, and your EMI will go up to Rs. 25,116.

It is important to note that the repo rate is not the only factor that affects your home loan EMIs. Other factors such as the loan amount, the term of the loan, and the credit score of the borrower will also play a role. However, the repo rate is a major factor, and it is important to be aware of how it can affect your EMIs.

If you are planning to take a home loan, it is important to factor in the possibility of repo rate hikes. You may want to consider taking a floating rate home loan, which will allow you to benefit from lower interest rates if the repo rate decreases. However, you should also be prepared for the possibility of higher EMIs if the repo rate increases.

It is also a good idea to have a financial buffer in place in case your EMIs increase. This will help you to avoid defaulting on your loan if your income is affected by a repo rate hike.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.

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