RBI keeps interest rates unchanged; Home loan EMIs may remain same

7 Jun 2024 , 10:58 AM

RBI kept the repo rate unchanged at 6.5%.

Home loan interest rates and equated monthly installments (EMIs) will stay the same because the Reserve Bank of India (RBI) decided to keep the repo rate at 6.5% on June 7, marking the eighth consecutive time it has remained unchanged.

Since October 1, 2019, banks have tied all retail floating-rate loans to an external benchmark, usually the repo rate. Therefore, any change in the repo rate directly affects the interest rates on these loans. Many economists predict that the RBI will only start lowering rates in the latter half of FY 2024-25, once inflation decreases to a more comfortable level for the RBI. This means existing borrowers will have to deal with higher interest rates for a few more months.

Inflation is still above the RBI’s four-percent target. India’s consumer price index (CPI) based inflation dropped slightly to 4.83% in April from 4.85% in March, but food inflation remains high at 8.7%.

Around 2021 and 2022, the lowest interest rates in the market were about 6.5% when the repo rate was four%, indicating a spread of 2.5% over the repo rate. Borrowers with such loans can consider switching to other lenders offering lower spreads and interest rates to save on interest costs.