Home Loan Rate Drop: How Much Can You Save on Your Home Loan Interest Now?

If you’re repaying a home loan, there’s good news. The Reserve Bank of India (RBI) has cut the repo rate twice in 2025, first in February and then again in April, by 25 basis points (bps) each, bringing the total rate cut to 50 bps.

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This reduction can lead to lower EMIs for borrowers whose loans are linked to the repo rate. While some lenders have already adjusted their rates, many others are expected to follow suit.

In this article, we break down:

• Who will benefit from repo rate cuts
• How much you can save on home loan interest
• What steps to take if you’re eligible
• What to do if you’re not currently eligible

Home Loan Rate Cut: Who Is Eligible, who is not?

You are eligible to benefit from the repo rate cut if your home loan is directly linked to the Reserve Bank of India’s repo rate, commonly referred to as the Repo Linked Lending Rate (RLLR) or an external benchmark-linked loan.

Also, your loan must be subject to periodic reset dates, typically every three months, during which your bank reviews and updates the applicable interest rate in line with changes to the repo rate.

You may not be eligible to benefit from a repo rate cut if your home loan is on a fixed interest rate, unless there’s a reset clause allowing periodic revision.

Similarly, loans linked to MCLR (Marginal Cost of Funds-Based Lending Rate) or internal benchmarks often experience a delayed or partial transmission of rate cuts, meaning the benefit may not reflect immediately—or at all.

Borrowers from non-banking financial companies (NBFCs) may also miss out, as NBFCs are not mandated to follow repo-linked rates like banks. They are free to set their loan rates based on their cost of funds and market conditions, which may or may not reflect the repo rate changes. Additionally, if your loan was taken from a cooperative bank or follows non-standard or legacy lending terms, it may not be aligned with the RBI’s repo rate, leaving you outside the scope of any immediate benefit.

Home Loan Subscribers: How to Benefit from Repo Rate Cut

If you’re eligible for the repo rate cut benefit, the first step is to check your loan agreement and confirm whether it mentions RLLR or any external benchmark; this ensures your loan is directly linked to the repo rate.

Next, check your bank’s interest rate announcements. Public sector banks are usually quicker to pass on the benefits. Sometimes banks may take up to 3 months to reset their interest rates based on their reset cycle.

To understand the impact on your repayments, use tools like 1 Finance’s Floating Loan Reset Calculator. It can help you estimate how much your EMI or loan tenure will change after the rate cut.

If your bank hasn’t adjusted your rate despite it being repo-linked, you can raise a formal request.

How Much Can You Save on Home Loan Interest After Repo Rate Cut?

Even a small reduction in your home loan interest rate can lead to meaningful long-term savings. Let’s say you’re repaying a loan over 20 years at an initial rate of 9%. A 50 bps drop to 8.5% can reduce your EMI and your total interest burden significantly.

Here’s an approximate look at how much you could save:

Example: A ₹50 lakh home loan borrower could save ₹1,595 every month—translating to ₹3.82 lakh over the loan’s lifetime.

You can use 1 Finance’s Loan refinance calculator to calculate the savings due to the repo rate cut.

Home Loan Rate Cut : What to Do If You’re Not Eligible for the Benefits?

If you’re not currently eligible for the repo rate cut benefit, there are still ways to potentially lower your home loan interest.

Start by checking your loan agreement for any reset clauses, especially if you’re past the initial lock-in period—this could open a window for rate revision.

If you’re on a fixed-rate loan and the interest rate cycle is trending downward, consider switching to a floating-rate loan to take advantage of future cuts.

Alternatively, explore refinancing options with another lender that offers repo-linked loans, as these provide faster and more transparent rate transmission. A well-timed switch could lead to significant savings over your loan tenure.

Will There Be More Repo Rate Cuts?

According to 1 Finance’s Macroeconomic Research, RBI may continue with an accommodative stance through 2025. If inflation softens and global trade stabilises, expect another 50–75 bps in potential cuts.

To summarise, Repo rate cuts can help you strategise your loan planning more effectively and reduce your overall interest burden. The resulting EMI savings can be redirected towards investments, emergency funds, or paying off other debts, improving your financial health.

You also gain flexibility in how you manage your loan—by adjusting your EMIs or your loan tenure, or a combination of both—and can even make a prepayment on your existing loan.

If you’re servicing a home loan, now’s the time to act. The back-to-back repo rate cuts could save you lakhs at the end of the tenure.

FAQs

What is the Repo Rate?
The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks. It’s a key tool the RBI uses to control inflation and manage liquidity in the economy.

How do I calculate the exact impact on my EMI?
Use tools like 1 Finance’s Floating Loan Reset Calculator or Loan Refinance Calculator to estimate changes in EMI or loan tenure based on the repo rate change.

How Can a Lower Repo Rate Reduce My EMI?
When the RBI cuts the repo rate, banks get funds at a cheaper cost. If your home loan is linked to the repo rate (called RLLR or external benchmark-linked), your interest rate also reduces—usually at your next reset date.

As a result:

• Your EMI comes down, or

• Your loan tenure shortens, depending on your loan structure

Example: A 50 basis point cut on a ₹75 lakh loan could lower your EMI by around ₹2,392/month, saving you over ₹5.7 lakh over 20 years.