If RBI again lowers the repo rate, will your home loan EMI fall? | Explanator | Mint

As the Reserve Bank of India (RBI) again lowered the repo rate by 25 basis points on Wednesday, the home loan EMIs are expected to decline. Over the past two months, RBI has cut the repo with a total of 50 basis points. In February, RBI lowered the measure of 6.5 percent to 6.25 percent. Therefore, the interest rates on home loans, which are linked to the MCLR and EBLR, will fall. Prior to October 1, 2019, floating rates are home loans to the MCLR, ie marginal cost of lending rates. This means that interest rates on home loans move upwards or downwards based on the marginal costs containing the deposit rates, repo rates, operating costs and the costs associated with maintaining the cash reserve ratio (CRR). With effect from October 1, 2019, floating tariff house loans are linked to external criteria, with the repo rate the most common. Other benchmarks to which the floating tariff home loan can be linked are the yields of the Treasury and other benchmarks. So, your home loan EMIs are likely to fall if one of the following happens: I. Your home loan is linked to the external measure rate (specifically the repo rate). Ii. Your home loan is linked to the marginal cost of the lending rate (MCLR). Degree of decline Although the banking regulator has met the repo rate with a total of 50 basis points in the last two MPC, how much of this cut is not clear to the consumer. Banks can decide to what extent this cut can be passed on to the consumer. Even if banks do not give the total benefit of 50 basis points, some of the benefits are likely to be communicated. Other loans will not fall, of course, all other loans with fixed interest rates. It typically contains personal loans isolated from the Repo rate movement. These are usually loans with short duration that are given at a fixed interest rate. Experts believe the rate cut will lead to economic growth through greater transfer. “We expect the monetary policy to support greater transmission to help the economy grow in the current uncertain world environment. We expect the market rates to remain well supported with 10 -year -old, who will trade within 6.40% -6.60%, with a positive bias. Short -term returns up to 1 year are probably also the current series,” says Amit Somit, Somite, Sumiths. Visit here for all updates for personal finance