RBI Repo Rate Hike: How Much Will Your Home Loan EMI Rise After 25 Bps Rate Increase?

Home loan borrowers could face higher monthly repayments after the Reserve Bank of India raised the repo rate by 25 basis points to 5.50% on Wednesday, with floating-rate loans likely to feel the impact as lenders reset rates.

A similar 25-bps increase in the lending rate would raise the EMI on a ₹50 lakh home loan with a 20-year tenure by about ₹794 a month. At 8.50%, the EMI stands at ₹43,391. At 8.75%, it would rise to ₹44,186.

The difference would be bigger for larger loans. The EMI on a ₹1 crore loan would increase by ₹1,589 to ₹88,371, while a ₹2 crore loan would cost ₹3,177 more a month at ₹1,76,742.

These calculations assume the lending rate rises from 8.50% to 8.75% and the tenure remains at 20 years. The increase for an individual borrower will vary depending on the loan rate, outstanding amount, remaining tenure and the reset terms with the lender.

Home Loan EMI After 25 Bps Rate Hike

The RBI raised the repo rate from 5.25% to 5.50% at its October monetary policy meeting, its first increase since February 2023.

For borrowers, the impact will depend on how quickly lenders transmit the increase.

A ₹75 lakh home loan at 8.50% carries an EMI of ₹65,087 for 20 years. At 8.75%, that rises to ₹66,278, or ₹1,192 more each month. For a ₹1.5 crore loan, the EMI increases from ₹1,30,173 to ₹1,32,557, a difference of ₹2,383.

Over the full 20-year tenure, a ₹50 lakh borrower would pay about ₹1.91 lakh more in interest if the EMI is increased and the tenure is kept unchanged. The additional interest works out to about ₹3.81 lakh on a ₹1 crore loan and ₹7.63 lakh on a ₹2 crore loan.

**What Happens To Existing Home Loans? **

Floating-rate borrowers will not necessarily see their EMI change immediately after the RBI decision. The revision will depend on the benchmark used by the lender and when the loan comes up for a rate reset.

For borrowers whose rates are revised higher, lenders can increase the EMI, extend the number of instalments or use a combination of the two.

Keeping the EMI unchanged would stretch the tenure. On the ₹50 lakh example used above, the repayment period would increase from 240 months to about 253 months if the rate rises to 8.75%, adding roughly 13 months to the loan.

Fixed-rate borrowers would not be affected by the repo rate increase during the period for which their rate is fixed.

With the repo rate now at 5.50%, attention will turn to banks and housing finance companies and the extent to which they pass the increase on to borrowers.

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