Stories
RBI Repo Rate Hike: Impact on Home Loans, EMIs and FDs
- •The Reserve Bank of India raised the repo rate by 25 basis points to 5.50 percent, increasing borrowing costs and boosting saver returns.
- •Home loan EMIs for floating-rate borrowers are expected to rise, with a 25-basis-point hike increasing the monthly payment by roughly Rs 780 on a Rs 50 lakh loan over 20 years.
- •Borrowers can choose to pay higher monthly EMIs or extend their loan tenure to keep payments unchanged.
- •Auto loans, personal loans, and other floating-rate credit products are also likely to become more expensive.
- •Savers benefit as banks may gradually increase interest rates on new fixed deposits, offering better returns for fresh investments or renewals.
Key Questions Answered
A 25-basis-point increase in the repo rate to 5.50 per cent can push monthly EMIs up by roughly Rs 780 on a Rs 50 lakh home loan with a 20-year tenure, especially for borrowers with floating-rate loans linked to external benchmarks. Borrowers typically face a choice between paying a higher EMI or extending the loan tenure. Fixed-rate borrowers, however, remain insulated during their fixed-rate period.
Savers could benefit as banks may gradually raise interest rates on new fixed deposits due to higher funding costs and increased competition. While existing fixed deposits continue to earn their original booked rate until maturity, fresh investors and those renewing maturing deposits can take advantage of better returns.
Yes, floating-rate personal loans, auto loans, and other credit products can become more expensive as banks reprice their lending rates following the repo rate hike. Prospective borrowers will face higher costs for new debt, while existing borrowers should check their loan linkage and upcoming reset dates.
