North India Statesman
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Whenever the repo rate changes from the Reserve Bank of India (RBI), it directly affects the monthly installments of Home Loan holders. Although the RBI has kept its major repo rate stable at 6.5% in a row in a row, but it is expected in the market that by the end of this year (possibly in Q3 or Q4) it can be cut. If this happens, then what will be the effect on home loans, and how much your EMI can be reduced, let’s know.
Most home loans are currently linked to external benchmarks, especially repo-linked lending rates (RLR). Therefore, any change in the repo rate will immediately affect your monthly installment (EMI). However, it is important to remember that certain (fixed) interest rate home loans will not be affected by this deduction, it will directly benefit to the borrowers with floating (convertible) interest rate.
Let us see how much difference can be made on your EMI if there is a reduction of 0.25% (25 basis points) and 0.50% (50 basis points) in the repo rate:
1. If the repo rate cuts 0.25% (25 basis points):
This will be considered a modest cut, but this will definitely provide relief to the borrowers. Possible reduction on various loan amounts and periods will be as follows:
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₹ 50 lakh loan:
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On a period of 15 years: ₹ 754 reduction in EMI (per month)
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On a period of 20 years: EMI reduction of ₹ 857 (per month)
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On a period of 30 years: EMI reduction of ₹ 979 (per month)
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₹ 75 lakh loan:
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On a period of 15 years: EMI reduction of ₹ 1,130 (per month)
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On a period of 20 years: ₹ 1,286 shortage in EMI (per month)
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On a period of 30 years: EMI reduction of ₹ 1,469 (per month)
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₹ 1 crore loan:
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On a period of 15 years: ₹ 1,507 shortage in EMI (per month)
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On a period of 20 years: ₹ 1,714 shortage in EMI (per month)
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On a period of 30 years: EMI reduction of ₹ 1,959 (per month)
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2. If the repo rate cuts 0.50% (50 basis points):
This will be a significant cut that will give much relief to the borrowers. In such a situation, the reduction in potential EMI will double:
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₹ 50 lakh loan:
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On a period of 15 years: EMI reduction of about ₹ 1,507 (per month)
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On a period of 20 years: EMI reduction of about ₹ 1,714 (per month)
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On a period of 30 years: EMI reduction of about ₹ 1,959 (per month)
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₹ 75 lakh loan:
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On a period of 15 years: Emi reduction of about ₹ 2,260 (per month)
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On a period of 20 years: EMI reduction of about ₹ 2,570 (per month)
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On a period of 30 years: EMI reduction of about ₹ 2,939 (per month)
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₹ 1 crore loan:
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On a period of 15 years: EMI reduction of about ₹ 3,013 (per month)
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On a period of 20 years: EMI reduction of about ₹ 3,428 (per month)
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On a period of 30 years: EMI reduction of about ₹ 3,918 (per month)
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These are the approximate figures and the actual shortage will depend on the policy of different banks, the terms of your loan agreement and the final announcement of the RBI. Nevertheless, this deduction can provide great relief to the borrowers and potentially promote home demand and overall economic activities. New borrowers can also expect a decline in interest rates, making loans and cheaper.
