Homebuyers, rejoice! Your next EMI could be cheaper with some banks — Is it time to refinance your EMI?

As of May 2025, home loan interest rates have seen a significant shift, with notable reductions from key banking institutions. The fresh home loans have seen a fall in recent with many falling below 8% following the Reserve Bank of India's (RBI) decision to cut the repo rate by 25 basis points on April 9. Several Indian banks have adjusted their Marginal Cost of Funds-Based Lending Rates (MCLR), impacting loan interest rates and Equated Monthly Installments (EMIs) for borrowers. These adjustments are in response to changing economic conditions and the RBI's monetary policy decisions.

State-owned lenders such as Bank of Baroda, Punjab National Bank (PNB), and Canara Bank have recently announced reductions in their MCLR rates across different time periods, with the changes set to take effect from May 2025.

The MCLR serves as a reference rate used by banks to determine interest rates on various types of floating-rate loans, including home loans, personal loans, and auto loans. A decrease in the MCLR can lead to potential decreases in EMIs or a shorter loan term, ultimately benefiting borrowers in the long run.

Canara Bank has made strategic cuts to its Marginal Cost of Funds-based Lending Rate (MCLR) across specific tenures. The overnight MCLR now stands reduced by 5 basis points to 8.30%, and the two-year rate has been decreased by 10 basis points to 9.25%. These adjustments position Canara Bank as a leader in offering the most competitive home loan interest rates, starting at 7.80%, effectively passing on the benefits of a 50-basis point repo rate cut to both new and existing borrowers.

Similarly, HDFC Bank has announced a reduction in its MCLR by up to 15 basis points, effective from May 7, 2025. This move sees their rates ranging between 9.00% and 9.20%, depending on the loan tenure, marking a decrease from the previous range of 9.10% to 9.35% set in April 2025. This decision aligns with the recent trend of banks adjusting rates following the Reserve Bank of India’s (RBI) repo rate cut of 25 basis points in April. The action by HDFC Bank is indicative of a broader strategy to enhance mortgage affordability and provide relief to borrowers.

Notably, ICICI Bank continues to offer its lowest rate at 8.75%, unchanged in spite of the 50-basis point reduction earlier this year. 

Other public sector banks, such as Bank of Maharashtra, Central Bank of India, and Union Bank of India, have fully implemented the 50-basis point cut, starting their interest rates at 7.85%. This rapid adjustment underscores the competitive landscape among public sector banks in responding to monetary policy shifts. Indian Bank and Indian Overseas Bank have also passed on the complete benefits of the repo rate cut, with starting interest rates from 7.90%. 

Bank of Baroda recently announced a reduction in its one-year MCLR by 5 basis points to 8.95%, effective May 12, 2025. However, it has maintained rates for other tenures, including overnight and six-month MCLRs, at their previous levels of 8.15% and 8.80%, respectively. These decisions reflect a cautious approach towards rate adjustments, balancing competitiveness with fiscal prudence. 

The impact of the RBI’s repo rate cut has been markedly different between private and public sector banks. While public sector banks have swiftly transmitted the full benefits to both new and existing customers, some private banks have been slower to adjust, instead opting to modify the spread over the repo rate. 

Here are the current home loan rates (source: Bankbazaar)