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Big Relief for Homebuyers: RBI Expected to Cut Interest Rates, Home Loan EMIs Could Hit 8-Year Low

A major announcement from the Reserve Bank of India (RBI) is just around the corner, and it could bring huge relief to aspiring homeowners across the country. The central bank is currently in the final leg of its crucial Monetary Policy Committee (MPC) meeting, and all eyes are now on June 6, when it is expected to announce a reduction in the repo rate — a move that could drive home loan interest rates down to their lowest levels in nearly 8 years.

With inflation largely under control, financial experts and economists believe the RBI may announce a rate cut of 0.25% to 0.50%, making home loans more affordable. If the rate cut happens as predicted, the EMI (Equated Monthly Installment) for a loan of ₹1 lakh over 20 years could drop to just ₹806.

What’s Driving the Anticipated Rate Cut?

Since assuming office, RBI Governor Sanjay Malhotra has already introduced two interest rate cuts — in February and April 2025, slashing the repo rate by 0.50% (50 basis points) in total. These cuts were aimed at boosting growth and supporting economic recovery.

Currently, the repo rate stands at 6%, and further reduction would signal the central bank’s continued support for credit-driven growth, especially in the housing sector.

Inflation Within Target, Opens Door for Further Cuts

The main reason behind the optimism surrounding another rate cut is that retail inflation has remained below the RBI’s target of 4% for three consecutive months. This sustained moderation in inflation provides the RBI with the flexibility to ease monetary policy further.

While a 0.25% cut is the most widely expected scenario, State Bank of India (SBI) has hinted in its report that there is also room for a "jumbo cut" of 0.50%, depending on broader economic conditions.

Home Loan Rates Could Touch Pre-COVID Levels

If RBI reduces the repo rate by even 25 basis points, home loan interest rates could fall to levels last seen in 2017 — the lowest in eight years, excluding the temporary cuts during the COVID-19 pandemic. Back in 2017, home loan rates hovered around 8% or higher, while they dipped to 6% during the pandemic, albeit briefly.

This means home loan seekers could now secure rates between 7% and 7.5%, especially from public sector banks, which typically respond more quickly to repo rate changes compared to private lenders.

Current Interest Rates and Possible Reduction

At present, leading public sector banks such as UCO Bank, Union Bank, Canara Bank, Indian Bank, and Bank of India are offering home loans at interest rates ranging between 7.75% and 7.90%. A rate cut could bring these rates down to approximately 7%, a level that would significantly reduce EMI burdens.

Private sector banks, such as HDFC, are usually slower to pass on the benefit of RBI’s rate cuts to customers. However, once they do, the reduced rates can significantly improve affordability.

EMI Calculation Example: How Much Will You Save?

Let’s take a look at how these potential cuts could benefit borrowers:

• Loan Amount: ₹1,00,000

• Loan Tenure: 20 years

• Estimated Interest Rate: 7.5%

• Monthly EMI: ₹806

If you’re planning to take a home loan of ₹20 lakhs, your monthly EMI could be just around ₹16,112 — making it easier for many families to finally afford their dream homes.

Why This Matters

With property prices stabilizing in several parts of the country and government subsidies still available for first-time buyers under various housing schemes, a drop in interest rates could boost housing demand, stimulate the real estate market, and help thousands of middle-class Indians become homeowners.

Final Word

All eyes are now on June 6, when the RBI’s Monetary Policy Committee will announce its decision. A favorable rate cut could mark the beginning of a more affordable home loan regime in India — potentially turning the dream of owning a house into reality for many.

Stay tuned for the official announcement. If you're planning to take a home loan, this might just be the right time to move forward.

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