Home loans get cheaper

RBI cuts interest rate by 0.25%

New Delhi: Home and auto loans will be cheaper with RBI Governor Raghuram Rajan reducing repo rate by 25 basis points to 6.50 per cent in its monetary policy review on Tuesday, a first reduction since September to bring the rate to its lowest in more than five years. Keeping room for more rate cuts in future, the central bank said it will remain accommodative in its policy stance going forward. The monsoon pattern will be a factor in deciding future course of interest rate reduction.

Rajan said that borrowing has already become significantly cheaper with banks having reduced interest rates by 25-50 bps even before monetary policy review. RBI’s move to go for a rate cut will help both the new and existing loan borrowers. The new customers will enjoy the benefit of repo rate cut as the banks will pass on the benefit to them anyway.

However, for existing customers the benefits will not be in the same proportion as new customers. Paisabazaar.com has given us a rough estimate on how the rate cut will impact your car and home loan.In another surprise move, the Reserve Bank of India also raised the reverse repo – or the rates lenders charge to the central bank – by 25 basis points to 6.0 per cent, while taking measures to ensure more availability of cash in the banking system. Realty experts welcomed the RBI move to cut the repo rate by 25 bps and called it a positive step that will assist the sector. The RBI had cut its repo rate by 125 basis points last year.