Home borrowers with loans linked to External Benchmark Linked Rate (EBLR) can breathe a little easier for now, as Reserve Bank of India (RBI) governor Sanjay Malhotra decided to keep the repo rate unchanged at 5.25%, during the Monetary Policy Committee (MPC) meeting that concluded on Wednesday (August 5, 2025). This is the fourth time in a row that the RBI has held the repo rate steady, allowing many borrowers to keep enjoying those low home loan interest rates a bit longer.Last year (2025) was a good year for home loan borrowers when the RBI slashed the repo rate by 125 bps. It provided relief to borrowers with loans linked to the EBLR, especially the repo-rate linked loans, since most home loans are based on the Repo Linked Lending Rate (RLLR) benchmark. But with retail inflation rising and the possibility of a repo rate hike getting stronger, one can’t rule out higher home loan interest rates down the line. How soon it happens will depend on whether the RBI waits for retail inflation to hit its upper tolerance band of 6% or it decides to raise the rate sooner. Before you continue readingHow financially free are you?Most people overestimate their financial freedom. Discover your Financial Freedom score through a quick survey How long this favourable situation lasts hinges on the RBI’s decision in the next few MPCs. RBI repo rate (Brief history) Date Repo rate (%) Change (%) 07-Feb-25 6.25% -0.25% 09-Apr-25 6.00% -0.25% 06-Jun-25 5.50% -0.50% 06-Aug-25 5.50% 0.00% 05-Dec-25 5.25% 0.25% 06-Feb-26 5.25% 0.00% 08-Apr-26 5.25% 0.00% 05-Jun-26 5.25% 0.00% 05-Aug-26 5.25% 0.00% Factors like the repo rate and inflation impact home loan interest rates. 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 bank. When the RBI reduces the repo rate, banks can get loans at a cheaper rate. Since banks save money with these lower-rate loans, they transfer these benefits to their borrowers by cutting interest rates on loans. Most floating rate home loans are linked to external benchmarks like repo rate. So, when the RBI cuts the repo rate, these interest rates drop right away. On the other hand, borrowers with their home loans linked to Marginal Cost of Funds-based Lending Rate (MCLR), experience a slower 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 also happens when the central bank raises the repo rate. Banks follow in the RBI’s footsteps and increase their home loan rates, resulting in a higher EMIs for borrowers with repo rate-linked loans. Currently, since the RBI hasn’t changed the repo rate since December 2025, banks are keeping their home loan rates steady, as the impact of previous repo rate changes have already been completed. However, right now, global uncertainty due to the Iran-US conflict, rising fuel prices and increased input costs are creating inflationary pressures. Retail inflation in India is also on the rise since October 2025 and has crossed the RBI’s target of 4%. 5 lowest home loan interest rates (for above Rs 30 lakh to up to Rs 75 lakh amount) Lender Home loan interest rate (% p.a.) Bank of Maharashtra 7.10%–9.90% Central Bank of India 7.10%–9.15% Bank of India 7.10%–10.00% UCO Bank*** 7.15%–9.25% Union Bank of India* 7.15%–9.60% Source: Paisabazaar How inflation can impact home loan rates in the future In India, fuel and energy prices surged due to supply disruptions from the Israel-Iran conflict starting February end. The Rupee’s value also fell against the US Dollar, increasing India’s import bills. It led to an increase in prices of many household items. As a result, retail inflation jumped from 2.74% in January to 3.48% in April to 4.38% in June 2026. The July retail inflation data is yet to come, but if it increases and touches the 6% upper tolerance limit of the RBI, the apex bank may hike the repo rate in future MPCs. If that happens, banks will also raise the repo rate-linked home loan rates.. CPI inflation since June 2025 Month Inflation rate Oct-25 0.25% Nov-25 0.71% Dec-25 1.33% Jan-26 2.74% Feb-26 3.21% Mar-26 3.40% Apr-26 3.48% May-26 3.93% Jun-26 4.38% For now, EMIs of repo rate-linked loans won’t get costlier but we can’t rule out a rate hike in the near future. But, there are still ways to save the interest 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 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- they can either reduce the EMI and maintain the same tenure or they can keep the same EMI with a reduced tenure. After the prepayment, if a borrower chooses to go for a reduced EMI, the loan tenure remains the same, but there are good savings on interest amount. If the borrower wants to maintain the same EMI amount after making a prepayment, they can save more on interest and the loan tenure can also be reduced. The interest saved in this scenario is significantly greater compared to when a borrower opts 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 60 lakh 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 lakh Outstanding tenure: 20 years Interest rate: 8% Prepayment amount: one extra EMI of Rs 41,822 each year 1st extra EMI prepayment month: April 2026 Interest saved: Rs 10.17 lakh Tenure 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 (years) 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