RBI cuts repo rate: Here’s how much you will save on your home loan EMIs

New Delhi:

In a significant relief to homebuyers, the Reserve Bank of India (RBI) on Friday reduced the repo rate by 50 basis points (bps) to 5.50 per cent. This is the third consecutive reduction by the central bank and with the latest move, the total reduction so far this year has reached 100 bps. According to  RBI Governor Sanjay Malhotra, the six-member monetary policy committee decided to lower the benchmark repurchase or repo rate by 50 basis points.

All banks are expected to reduce interest rates on loans soon. As loans become cheaper, the EMI of all loans, like home loans and car loans, will also come down. Here, we are going to tell you how the latest cut is going to impact your EMI of your home loan and how much you will save.

How It Will Impact Your EMIs

Here, we will try to explain the EMI calculation by referencing the interest rate offered by the State Bank of India (SBI). The PSU bank currently offers home loans at interest rates starting at 8.00 per cent. After today’s decision to slash the repo rate by 50 bps, the starting rates of SBI home loans are expected to come down to 7.50 per cent. This, in turn, will have a considerable impact on your EMIs. 

How Much Will You Save In A Year

Suppose you took a home loan of Rs 50 lakh from the SBI for a tenure of 30 years at an interest rate of 8.00 per cent. For this, you have to pay an EMI of around Rs 36,688 every month. After the repo rate cut, the loan will become cheaper and you will have to repay the loan at the rate of 7.50 per cent. At the rate of 7.50 per cent, for a home loan of Rs 50 lakh for 30 years, you will have to pay an EMI of about Rs 34,961 every month. In this way, you will save about Rs 1,727 every month. Therefore, a borrower will be able to save about Rs 20,724 every year.

Bank Offers Loan On Floating Rate Of Interest

One should keep in mind that banks offer home loans at floating rates. This means the EMI will be linked to the external rate and when the RBI reduces the repo rate, your loan interest rates and EMI will also decrease. Similarly, when the RBI increases the repo rate, your loan interest rates and EMI will also increase.