Big Relief for Home and Car Loan Borrowers: EMIs Likely to Get Cheaper in FY 2025-26

 There’s encouraging news for millions of Indians who have taken or are planning to take out home or car loans. According to a recent report by SBI Research, borrowers may soon see a noticeable drop in their EMIs (Equated Monthly Installments) this financial year.

The report suggests that the Reserve Bank of India (RBI) could slash key interest rates by as much as 1.25% to 1.5% during the 2025–26 fiscal year in an effort to keep inflation under control. If this happens, banks across the country may respond by significantly reducing home and auto loan interest rates, directly benefiting existing and new borrowers.

Why EMIs Could Become Cheaper

The primary reason for this expected rate cut is the central bank’s ongoing strategy to stabilize inflation while supporting economic growth. According to analysts at SBI, there is strong likelihood that the RBI will lower its repo rate — the rate at which it lends money to commercial banks — at least two more times this year.

Previous repo rate cuts have already led to some moderation in loan EMIs, and similar moves going forward could bring additional relief to household budgets, especially for middle-class families managing large EMIs on their homes or vehicles.

Impact on Borrowers

If the RBI proceeds with the anticipated policy rate cuts, the move will translate into lower lending rates by banks. Here’s how borrowers would benefit:

• Lower Interest Rates: With repo rate reductions, banks typically lower the interest rates on loans linked to external benchmarks.

• Reduced EMIs: A drop in interest rate by even 1% can result in thousands of rupees saved per year in EMIs, especially for long-term loans such as home loans.

• Higher Eligibility: As EMIs reduce, individuals may qualify for higher loan amounts based on their income levels.

• Encouragement for New Borrowers: Reduced rates often prompt people to consider home or car ownership, which can stimulate demand in real estate and auto sectors.

SBI Research: Rate Cut Projections

The SBI Research report outlines that there is room for policy easing given that inflation trends have been relatively moderate. Analysts believe that if consumer price index (CPI) inflation stays within the RBI’s comfort zone, it will open the door for multiple rounds of rate cuts through FY 2025-26.

SBI expects a cumulative rate cut between 125 to 150 basis points in the coming months, which would bring the repo rate down substantially from current levels. However, the timing and magnitude of each cut will depend on economic indicators, including inflation figures, global interest rates, and fiscal policies.

What Should Borrowers Do Now?

For those currently repaying a home or car loan, or planning to apply for one soon, this could be a good time to reassess their loan structures:

• Existing Borrowers: Those with loans linked to the repo rate or external benchmark will automatically benefit from the rate cuts. It's advisable to monitor RBI policy announcements closely.

• New Applicants: If you're considering a big purchase, such as a house or car, you might benefit from waiting a few months for possible rate reductions.

• Loan Transfers: Borrowers with older loans on fixed rates may want to explore balance transfer options to lower interest rates.

Bottom Line: A Potential Break for Your Budget

As the RBI considers lowering rates in FY 2025-26, home and car loan borrowers across India may experience long-awaited relief. Lower EMIs will not only help with personal budgeting but could also drive demand in housing and automobile markets.

Stay tuned to RBI’s upcoming policy meetings and keep an eye on loan interest rate announcements from your bank — your monthly budget might just get lighter.