Repo rate on hold at 5.25%: How your home loan changes after RBI’s policy pause

Home loan: The Reserve Bank of India (RBI) on Thursday decided to keep the policy repo rate unchanged at 5.25%, signalling a pause after an aggressive rate-cut cycle through 2025. For borrowers with floating-rate home loans, the decision offers near-term reassurance: EMIs are unlikely to decline further immediately, but the chances of a sharp increase also appear limited.

The decision was taken at the Monetary Policy Committee (MPC) meeting held between February 4 and 6, following a detailed review of inflation trends, liquidity conditions, growth outlook, and transmission of past rate cuts. The MPC voted unanimously to maintain the repo rate at its current level, indicating a preference to assess how earlier easing measures continue to play out across the economy.

How RBI cut rates through 2025

Between February and December 2025, the RBI reduced the repo rate by a cumulative 125 basis points, bringing it down from 6.50% to 5.25% to support economic growth amid slowing global demand and domestic headwinds. The easing cycle began with a 25 basis point cut in February 2025, followed by a similar reduction in April. In June, the central bank delivered a sharper 50 basis point cut, taking the repo rate to 5.50%. Rates were then held steady in August and October before a final 25 basis point cut in December completed the cycle.

These sustained reductions pushed home loan interest rates to their lowest levels since April 2020, significantly easing repayment pressure for households and improving housing affordability.

Why borrowers felt the benefit quickly

Most home loans in India are now linked to external benchmarks such as the External Benchmark Lending Rate (EBLR) or the Marginal Cost of Funds-based Lending Rate (MCLR). This ensured faster and more transparent transmission of RBI’s rate cuts to retail borrowers. As lending rates declined, borrowers benefited either through lower monthly EMIs or shorter loan tenures—both of which helped reduce total interest outgo over time. For many households, these savings provided relief at a time when living costs remained elevated.

Where home loan rates stand now

As of January 30, 2026, public sector banks continue to offer the most competitive home loan rates, typically in the 7.15–7.30% range. Canara Bank and Union Bank are among the lowest-cost lenders. In contrast, private banks such as HDFC Bank and Axis Bank are charging closer to 8%, while rates at some lenders can go up to 9%, depending on the borrower’s credit profile and loan terms.

Adhil Shetty, CEO of BankBazaar.com, said the RBI’s pause reflects a desire to monitor inflation, liquidity, and policy transmission before taking further action. “Most of the easing has already flowed into retail lending, which is why home loan rates remain relatively competitive despite the pause. Borrowers can still optimise costs by keeping EMIs higher to shorten loan tenures, while balance transfers remain relevant for incremental savings,” he said.

What the rate cuts mean in rupee terms

The impact of lower interest rates becomes more pronounced over long tenures. On a ₹50 lakh home loan with a 20-year tenure, a 125 basis point reduction can lower the EMI by nearly ₹3,900 and reduce total interest paid by around ₹9.3 lakh. For a ₹75 lakh loan over the same period, EMI savings rise to over ₹5,800 per month, while total interest savings can exceed ₹14 lakh.

Experts urge caution despite stability

Shubham Gupta, CFA and Co-founder of Growthvine Capital, said that while the RBI’s decision signals stability, borrowers should not assume interest rates will only move in one direction. “Inflation has eased significantly, but the RBI has made it clear that it will closely track inflation trends. Home loan borrowers should not assume a simple downward trajectory for rates,” he said.

Gupta cautioned prospective buyers to stress-test affordability. For instance, a borrower taking an ₹80 lakh loan may find current EMIs comfortable, but a 1–2% rise in interest rates could increase monthly payments by ₹4,000–₹10,000 over a 20-year tenure. “Ideally, EMIs should stay within 40–45% of take-home income even after factoring in possible rate hikes,” he said, adding that maintaining liquid emergency reserves covering at least six months of expenses and EMIs is critical for long-term financial resilience.

Prashant Mishra, Founder and CEO of Agnam Advisors, echoed similar concerns, noting that stable rates do not automatically justify taking on large financial commitments. “If a household plans to buy a ₹1 crore home, affordability should be assessed based on repayment capacity, not just what lenders are willing to offer,” he said. He added that monthly EMIs should ideally remain within 30–35% of gross income at current rates, with total EMIs capped at 40–45%.

Mishra also highlighted the importance of factoring in additional costs such as stamp duty, registration charges, interiors, and ongoing maintenance. “Buyers must not compromise long-term savings to fund these expenses. An emergency fund covering six to nine months of expenses and EMIs is non-negotiable,” he said.

What RBI’s pause means for borrowers

By holding rates steady, the RBI has signalled that the bulk of easing may be behind it for now. EMIs are likely to remain stable in the near term, further sharp cuts appear unlikely, and future movements will depend on inflation and growth dynamics. Existing borrowers may use this period to review loan terms or refinance, while new homebuyers continue to benefit from relatively attractive rates compared to pre-2025 levels.