Will Home Loan EMIs Reduce In October? Here’s What You Should Know
Updated: 28-01-2025 at 6:39 AM
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Many home loan borrowers have been waiting for lower EMIs due to falling interest rates. In October, there might finally be some positive news. Home loan borrowers have been facing slight difficulty due to the increase in interest rates, which also affects the EMIs. But now, the Reserve Bank of India (RBI) has been adjusting the repo rate, which affects loan interest rates, including home loans. Let’s understand in detail.
Why Are The Interest Rates On Home Loans Falling?
The RBI is always figuring out ways to tackle inflation and manage economic growth side by side. Because of this, RBI has decided to make adjustments to the repo rate which will impact the home loan interest rates as well.
Commercial banks often need loans to manage the bank smoothly, so they take loans from RBI. The repo rate is the interest rate at which commercial banks take or borrow money from the Reserve Bank of India.
A lower repo rate means commercial banks can borrow money at cheaper rates. This will affect the home loans as well, as the commercial banks will make the interest rates cheaper which additionally reduces the EMIs.
The reduction might not happen immediately as banks usually take time to pass on the benefits of the reduced rates to their customers. The reduction might be seen in 3-4 months.
"The RBI is likely to continue to stress being 'actively disinflationary', and be on wait-and-watch mode for assessing multiple macro forces - unless, of course, global winds force them to move focus to financial stability over the 4% inflation mandate," says Madhavi Arora, Lead Economist, Emkay Global Financial Services.
What Should Home Loan Borrowers Do?
Even though the interest rates are expected to fall soon, home loan borrowers should not delay their plan to purchase a house. They should purchase their house before the price increases. This will ensure that they secure their desired property.
According to Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution Pvt. Ltd., “Property prices are rising, so if a buyer finds a property that fits their needs and budget, they should go ahead with the purchase.”
As home loans are a long-term commitment it will not matter if people purchase their house now or when the prices drop. In the long term, they will regardless see a significant price difference.
Borrowers can take several steps to maximise the benefits of falling interest rates. Let’s take a look at a few ways.
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Borrowers on fixed-rate loans should consider switching to floating-rate loans to benefit from future rate cuts.
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If the current lender isn’t passing on the rate cuts, home loan borrowers should consider switching their finances with a different bank that offers a lower rate to make the most of the reduced rates.
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With lower interest rates, prepaying a portion of the loan can significantly reduce the principal. This will help in long-term savings.
"Existing home loan borrowers who have witnessed substantial improvements in their credit profile due to improved credit score, income or occupation profile since availing their home loan should also explore the possibility of interest cost savings through home loan balance transfer. Their improved credit profile may make them eligible for home loans at much lower rates from other lenders," says Ratan Chaudhary, Head of Home Loans, in a leading finance firm.
Conclusion
Staying updated on home loan rates will significantly help home loan borrowers save in the future. Home loan borrowers should start bargaining and planning now to make the most out of the cut rates. This will ensure that they secure their desired houses while also saving significantly in the future.
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