The Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 5.25% following the conclusion of its three-day Monetary Policy Committee (MPC) meeting on February 6, 2026. As a result, home loan borrowers—especially those with loans linked to the repo rate—should not expect any immediate reduction in their EMIs.
This pause comes after the RBI had reduced the repo rate by 25 basis points in December 2025, part of a broader easing cycle that saw a cumulative 125 basis points cut last year. Those earlier reductions had already made loans cheaper for borrowers, particularly for home loans linked to external benchmarks such as the Repo Linked Lending Rate (RLLR).
Why RBI Chose to Hold Rates Steady
The central bank opted against a rate cut this time due to several factors. Inflation remains under control, small savings schemes continue to offer relatively high returns, and the 10-year government bond yield is already elevated at around 6.65%. Together, these conditions have limited the RBI’s ability to ease rates further without risking financial imbalances.
Could Repo Rates Be Cut in the Future?
While the RBI has paused for now, future rate cuts are not ruled out. Any change will depend on how inflation trends, bond yields, and global interest rate conditions evolve. If these factors soften, the RBI could resume easing, prompting banks to lower home loan interest rates.
How Borrowers Can Save Without a Rate Cut
Even with the repo rate unchanged, home loan borrowers can significantly reduce their interest burden and loan tenure by using smart repayment strategies.
1. Prepaying Your Home Loan
Loan prepayment is one of the most effective ways to save on interest. Borrowers can make partial payments at any stage of the loan, but the maximum benefit is achieved when prepayments are made in the early years.
After a prepayment, lenders usually offer two options:
Reduce EMI while keeping tenure unchanged, or
Keep EMI unchanged and reduce the loan tenure
Choosing to keep the EMI unchanged results in the highest interest savings, as the loan gets repaid faster.
Example:
For a home loan with:
Outstanding principal: Rs 50 lakh
Remaining tenure: 20 years
Interest rate: 8%
A one-time prepayment of Rs 5 lakh (10%) can save:
Rs 15.85 lakh in interest
49 months (over 4 years) in tenure
Even if the same Rs 5 lakh is prepaid in three equal instalments over three years, borrowers can still save:
Rs 14.51 lakh in interest
46 months in tenure
2. Paying One Extra EMI Every Year
Another simple strategy is paying one additional EMI annually. On the same Rs 50 lakh loan, paying one extra EMI each year can help save:
Rs 10.17 lakh in interest
41 months (3 years and 5 months) in tenure
This option works well for salaried individuals who receive annual bonuses or increments.
3. Refinancing or Balance Transfer
Refinancing involves shifting your loan to a new lender offering a lower interest rate. Borrowers with a credit score of 700 or above and a strong repayment record are most likely to benefit.
Example:
If a borrower has:
Outstanding loan: Rs 50 lakh
Tenure: 20 years
Current interest rate: 8.5%
And refinances at 7.5%, the total interest saved can be Rs 7.47 lakh over the loan tenure. Savings rise proportionately for higher loan amounts.
Understanding Repo Rate Transmission
Home loans linked to external benchmarks such as the repo rate benefit the fastest from RBI policy changes, typically within three to four months. Loans linked to older benchmarks like MCLR or base rate adjust more slowly due to longer reset cycles.
What Borrowers Should Do Going Forward
Analyst Views:
Amit Modi, Director, County Group, said, “Seen in the context of GDP growth projected at 7.4% and the retail inflation less than 4%, the news of RBI keeping the repo rate unchanged at 5.25% will provide tailwinds to real estate growth. More so, India’s current trade deals between the EU and the USA will lead to, among others, higher foreign investment in India, which will further boost the country’s economy. Coming on the heels of the setting up of the Infrastructure Risk Guarantee Fund and City Economic Regions with Rs. 5,000 crore allocation per region over five years, including temple towns, as well as a focus on tier 2 and 3 cities in the budget, the country’s real estate sector is poised for growth.”
Gurpal Singh Chawla, Managing Director, TREVOC Group, said “After reducing the repo rate by 25 bps in December, the RBI’s decision to keep the repo rate unchanged at 5.25% will continue the benefits of reduced EMI to the homebuyers, both new and existing. Seen in the context of low retail inflation, this will increase liquidity in the market and encourage new homebuyers to go for their dream homes. This will be especially true for the tier 2 and 3 cities, where the prices are still affordable, and this reduction matters more when compared to the luxury segment. The country’s high projected GDP growth and higher FDI due to recent trade deals will further add to the positive sentiments.”
Umang Jindal, CEO, Homeland Group, said “The RBI’s decision on the repo rate is a positive signal for the real estate sector, particularly for end users who have been waiting on the sidelines. Lower borrowing costs make home loans more affordable and restore buyer confidence, which is critical for sustained demand in residential markets like NCR. From a developer’s perspective, stable and accommodative monetary policy also supports project execution and long-term planning. Overall, this move should help accelerate housing consumption while keeping market fundamentals intact.”
Rakesh Kaul, CEO and Managing Director, Ralith Realty, said “A steady repo rate at 5.25% offers much-needed continuity for the housing sector, where purchase decisions are closely tied to interest rate certainty. Stable EMIs support end-user sentiment, while developers benefit from better visibility on funding costs. The infrastructure-led thrust of the Union Budget further enhances housing viability by improving connectivity and livability. With macro risks moderating, this environment encourages long-term capital deployment into residential projects, supporting new launches, sustained demand, and value creation across housing markets.”
With interest rates likely to remain stable in the near term, borrowers should:
Review whether earlier repo rate cuts have been fully passed on
Use prepayments strategically to cut interest costs
Consider balance transfers after accounting for all associated charges
Focus on reducing loan tenure rather than EMIs for maximum savings
A stable interest rate environment, even without further cuts, still offers borrowers multiple ways to strengthen long-term financial health and significantly reduce the total cost of their home loans.
