Home loan customers may have to wait as much till December for an EMI cut as RBI keeps rates unchanged

Borrowers on repo-linked credit including home loans will usually see repo rates changes reflected in their loans within 1-3 months of a rate change

Looking forward to a cut in your home loan EMIs? You may have to wait till much later this year since Reserve Bank of India (RBI) Governor Shaktikanta Das announced on Wednesday, October 09, 2024, that rates were kept unchanged after the three-day RBI Monetary Policy Committee (MPC) meeting.

The repo rate has remained completely unchanged so far at 6.5% since February 2023

How will home loan borrowers benefit if the RBI cuts rates?

An RBI rate cut may induce the lending institution to reduce the home loan interest rate for those with a floating rate loan. So the borrower can then opt to change either the tenure of the loan or the EMI itself.

It is also possible for borrowers to transfer loans to another financial institution which offers newer and possibly lesser rates.

However, your individual credit score also plays a role in deciding the interest you pay.

The central bank is likely to introduce a 50-basis point (bps) rate cut in two instalments, mostly in December 2024 and February 2025, according to a Moneycontrol report which cited economists.

The repo rate has remained completely unchanged so far at 6.5% since February 2023, marking this, the tenth consecutive meeting of the RBI's MPC where rates have remained unchanged.

However, the central bank changed its policy stance from 'withdrawal of accommodation' to 'neutral'.

The Moneycontrol report cited Aditi Nayar, Chief Economist, and Head Research and Outreach, ICRA as saying that "two rate cuts of 25 bps each, in the December 2024 and February 2025 policy reviews,” may happen, with Kanika Singh, Chief Risk Officer at the Indian Mortgage Guarantee Corporation (IMGC) also believing in a possible December rate cut.

This has been attributed to an improving inflation outlook and the global monetary easing trend, with the European Central Bank (ECB), Switzerland, Sweden, Canada, Brazil, Peru, and China having eased their monetary policy after the US Fed did so by 50 bps.