Hyderabad, Oct. 7: The Reserve Bank of India (RBI) 25 basis point repo rate hike to 5.50% is likely to increase borrowing costs for floating rate home loan borrowers.
The RBI raised the repo rate from 5.25% to 5.50% on Wednesday. It also shifted its monetary policy stance from neutral to calibrated tightening.
Floating rate home loans are linked to external benchmarks, including the repo rate. Banks may pass on the higher funding cost through increased lending rates.
As a result, borrowers could face higher EMIs or longer repayment periods. For example, a loan carrying an 8% interest rate could rise to around 8.25% if the full 25 basis point increase is passed on.
Floating Home Loan Costs May Rise
However, the actual impact will depend on how individual banks revise their lending rates. Borrowers should therefore check official updates from their respective banks.
The RBI’s latest decision came amid inflation concerns, higher crude oil prices and global economic uncertainty. The central bank said its policy stance now allows for further tightening or a pause, depending on evolving conditions.
This was the RBI’s first repo rate increase since February 2023. The central bank had kept the rate unchanged for an extended period before the latest hike.
RBI Governor Sanjay Malhotra indicated that near term rate cuts were no longer under consideration. He said future policy action would depend on economic and inflation conditions.
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