Home loan customers expecting a cut in their EMIs may need to wait until December for relief. The Reserve Bank of India (RBI) is likely to reduce the repo rate in two steps, with possible cuts in December 2024 and February 2025, but not during its October policy announcement.
Since home loan interest rates are linked to the repo rate, a cut will directly benefit borrowers. For example, a 50 basis point (bps) reduction could save a borrower a significant amount in total repayments and shorten the loan tenure.
Rate cuts are usually implemented quickly by nationalised banks, while private banks might take a bit longer. Borrowers can choose to reduce their EMIs or shorten the loan term based on their preference once rates are lowered.
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To further benefit, borrowers can transfer their loans to other banks offering lower rates. It’s also important to maintain a good credit score, especially during the festive season, to avoid affecting interest rates.