News: RBI lifts repo rate to 5.50%: what a quarter-point rise could add to home loan EMIs-07-10-2026
The Reserve Bank of India (RBI) raised its repo rate by 25 basis points to 5.50% on October 7, after almost three-and-a-half years, citing inflation and West Asia tensions. New home loans may become costlier and EMIs on floating-rate loans could rise, depending on how lenders pass on the increase.
The Monetary Policy Committee (MPC) had held the rate at 5.25% with a neutral stance in August. Governor Sanjay Malhotra said the MPC voted unanimously for the hike.
Raoul Kapoor, co-CEO of Andromeda Sales and Distribution, called the move in line with expectations and said the impact on borrowers should be marginal as home loan rates, from around 7.15%, remain attractive. If the full 25 bps is passed on, 7.15% could become about 7.40%, adding roughly Rs 759 to the monthly EMI on a Rs 50 lakh, 20-year loan and about Rs 1,516 on a Rs 1 crore loan. The actual effect depends on the lender, benchmark and borrower, and on whether it is absorbed via a higher EMI, longer tenure or both.
Renu Maheshwari of Finscholarz, a SEBI-registered investment advisor, said the hike begins an upward cycle, but a 15- to 20-year loan will see two to three full tightening and easing phases, so buying decisions should rest on life goals, not short-term rate moves. Cash-flow pressure is heaviest in the first five years, and she urged stress-testing finances over five to ten years with a fee-only planner.
Experts said borrowers should not rush to prepay a loan because of the hike, and should first check their rate, remaining tenure and benchmark, the lender’s spread and any prepayment charges, and compare balance-transfer offers.
Kapoor said the hike matches expectations given global uncertainty, inflation, rising bond yields and a depreciating rupee, and will put some upward pressure on car and personal loan rates as well.
