It was a moment of relief for home loan borrowers with loans linked to the floating rate as the Reserve Bank of India (RBI) governor Sanjay Malhotra maintained the repo rate at 5.25% in the Monetary Policy Meeting (MPS) concluded on Friday (June 5, 2025). The RBI maintained the repo rate for the fourth consecutive MPC, which extended the spell of low home loan rates for a lot of borrowers. However, amid rising inflation, home loan borrowers may not stay happy for a long time as an increase in the repo rate may not be ruled out in the coming MPCs. Good time for home loan borrowers started when the Central bank reduced a cumulative 125 bps repo rate in 2025. Many banks followed in the RBI footsteps, cutting interest rates on floating rate loans. How long do they enjoy that good time will depend on RBI’s decision in the next few MPCs. How repo rate impacts home loan interest rates The repo rate impacts the home loan rates since it is the rate at which banks borrow money from the Central. When the RBI reduces the repo rate, the same loan is available to banks at a lower rate. Since banks save amounts by having a low-rate loan, they transfer these benefits to their borrowers by cutting loan interest rates. Interest rates of most of floating rate home loans are linked to external benchmarks such as repo rate. These interest rates fall first when the RBI cuts the repo rate. However, borrowers with their home loans linked to Marginal Cost of Funds-based Lending Rate (MCLR) also see a slow-paced transmission of the repo rate cut into their loan EMIs. As far as borrowers with fixed interest rate loans are concerned, their loans are not linked to the repo rate and there is no change in their interest rates. The opposite happens when the Central Bank increases the repo rate. Banks follow-in footsteps to increase their home loan rates, resulting in a higher EMI for borrowers with repo rate-linked loans. In situations like the present, when the Central Bank hasn’t changed the repo rate from December 2025, banks maintain the status quo in their home loan rates given the impact of previous repo rate changes has been completed. But in the current situation, factors such as fuel and gas price rise, increase in input costs and the currency’s fall are creating inflationary pressure. The Iran-US and Israel-Lebanon conflicts have further aggravated fears of inflation. So, a future repo rate hike can’t be ruled out which can force banks to increase loan rates. How inflation can impact home loan rates in the future Fuel and energy prices rose in India due to the Israel-Iran conflict-led supply disruptions. It led to an increase in prices of many household items. Rupee’s value fell against the US Dollar, increasing India’s import bills. Inflation in India rose from 2.74% in January to 3.48% in April with an expectation of a higher rate in May. These factors indicate that the RBI can increase the repo rate in the upcoming MPCs. If that happens, banks will raise repo rate-linked home loan rates. However, for now, EMIs of repo rate-linked loans won’t get costlier. But we can not rule that out in the near future. But, there are still ways to save the interest amount on home loans in the future. Here, we will discuss some of those strategies. Home loan prepayment Prepayment is an effective strategy for trimming a home loan interest, tenure or both. One can opt for prepaying a percentage of the home loan, a fixed amount or an extra EMI(s) every year. Banks allow borrowers to make a prepayment at any stage of the loan, but borrowers can save a higher amount if they prepay the loan in its early stage. When a borrower prepays a home loan, the lender provides them with two options- either they can reduce the EMI amount with the same tenure or they can keep the same EMI with a reduced tenure. After the prepayment, if a borrower chooses to go for the reduced EMI amount, the loan tenure remains the same, but there is good savings on interest amount. If the same borrower wants to keep the EMI amount the same as before the prepayment, interest amount saving is bigger and the loan tenure is also reduced. The interest saved in such a stage is significantly higher compared to when a borrower chooses to reduce the EMI amount. Let’s see how much interest and time you can save in different prepayment conditions. Our calculations will show only conditions where you choose to keep the EMI the same as before prepayment. Interest and tenure saved when you make one-time prepayment of loan Let’s assume your home loan outstanding principal is Rs 50 lakh, the remaining tenure is 20 years, and the interest rate is 8%. If you choose to make a one-time prepayment of Rs 5 lakh (10% of principal), you will save Rs 15.85 lakh in interest and four years and one month (49 months) in tenure. One-time prepayment calculations for different outstanding loan amounts Outstanding principal amount Outstanding tenure (years) Interest rate (%) Prepayment amount (10% of principal) Interest saved (Rs) Tenure saved (months) Rs 50 lakh 20 8 Rs 5 lakh Rs 15.85 lakh 49 Rs 60lakh 20 8 Rs 6 lakh Rs 19.01 lakh 49 Rs 70 lakh 20 8 Rs 7 lakh Rs 22.18 lakh 49 Rs 80 lakh 20 8 Rs 8 lakh Rs 25.36 lakh 49 Rs 90 lakh 20 8 Rs 9 lakh Rs 28.53 lakh 49 Rs 1 crore 20 8 Rs 10 lakh Rs 29.10 lakh 49 Interest and tenure saved when you make more than one prepayment If you don’t want to make a one-time payment equal to 10% of the principal amount, but prepay that amount in three equal instalments, you can still save Rs 14.51 lakh in interest and 46 months (3 years and 10 months) in tenure on the same Rs 50 lakh loan outstanding principal amount.Loan outstanding- Rs 50 lakh Outstanding tenure- 20 years Interest rate- 8% Prepayment amount- Rs 5 lakh (10% of principal in three equal instalments of Rs 1,66,666 each) Prepayment dates- 1st prepayment (April 2026), 2nd prepayment (April 2027), 3rd prepayment (April 2028). Interest saved- Rs 14.51 lakh Tenure saved- 46 months (3 years and 10 months) Prepayment calculations for different amounts of loan (when prepayment is 10% of outstanding principal but made in 3 equal instalments) Outstanding principal amount Outstanding tenure (years) Interest rate (%) Prepayment amount (in 3 instalments) Interest saved (Rs) Tenure saved (months) Rs 50 lakh 20 8 Rs 5 lakh Rs 14.51 lakh 46 Rs 60lakh 20 8 Rs 6 lakh Rs 17.41 lakh 46 Rs 70 lakh 20 8 Rs 7 lakh Rs 20.31 lakh 46 Rs 80 lakh 20 8 Rs 8 lakh Rs 23.21 lakh 46 Rs 90 lakh 20 8 Rs 9 lakh Rs 26.12 lakh 46 Rs 1 crore 20 8 Rs 10 lakh Rs 29.01 lakh 46 Interest and tenure saved when you pay one extra EMI each year The third condition can be when you choose to prepay one extra EMI each year. On the same Rs 50 lakh outstanding principal amount, if you prepay one extra EMI each year, you can save Rs 10.17 lakh in interest and 3 years and 5 months (41 months) in tenure.Outstanding home loan principal amount- Rs 50 lakhOutstanding tenure- 20 yearsInterest rate- 8%Prepayment amount- one extra EMI of Rs 41,822 each year1st extra EMI prepayment month- April 2026Interest saved- Rs 10.17 lakhTenure saved- 41 months (3 years and 5 months)Prepayment calculations for different amounts of loan (when you pay 1 extra EMI each year) Outstanding principal amount Outstanding tenure (years) Interest rate (%) Extra EMI amount to be paid every year Interest saved (Rs) Tenure saved (months) Rs 50 lakh 20 8 Rs 41,822 Rs 10.17 lakh 41 Rs 60 lakh 20 8 Rs 50,186 Rs 12.21 lakh 41 Rs 70 lakh 20 8 Rs 58,511 Rs 14.24 lakh 41 Rs 80 lakh 20 8 Rs 66,915 Rs 16.28 lakh 41 Rs 90 lakh 20 8 Rs 75,280 Rs 18.31 lakh 41 Rs 1 crore 20 8 Rs 83,644 Rs 20.34 lakh 41 Refinancing of home loan Refinancing is another way to save interest on your home loan. In refinancing, you choose a new lender which settles the dues of your loan with the existing lender and takes over the outstanding loan. A new lender can offer a lower interest if you have a good credit score such as 700+ with a good repayment record. If you have Rs 50 lakh outstanding principal for 20 years at 8.5% interest rate, and the new lender offers you a 7.5% interest rate, in 20 years, you can save Rs 7.47 lakh.Interest saved on different amounts of home loans due to refinancing Outstanding principal amount Outstanding tenure Current interest rate Interest rate after refinancing Amount saved due to refinancing Rs 50 lakh 20 8.50% 7.50% Rs 7.47 lakh Rs 60 lakh 20 8.50% 7.50% Rs 8.96 lakh Rs 70 lakh 20 8.50% 7.50% Rs 10.45 lakh Rs 80 lakh 20 8.50% 7.50% Rs 11.95 lakh Rs 90 lakh 20 8.50% 7.50% Rs 13.44 lakh Rs 1 crore 20 8.50% 7.50% Rs 14.94 lakh Interest saved on different amounts of home loans due to refinancing