Home loan EMI for these borrowers will go up as RBI increases repo rate by 25 bps: Know the impact on Rs 25 lakh-Rs 2 cr home loans

Borrowers with home loans linked to the External Benchmark Linked Rate (EBLR) have enjoyed a low-interest-rate cycle for a long time. However, their joy ride has now ended as as the Reserve Bank of India (RBI) increased the repo rate from 5.25% to 5.50% in its Monetary Policy Committee (MPC) meeting today (Wednesday, October 7, 2026).

After December 2025, this is the first time that the RBI has changed the repo rate, which means borrowers who have their loans linked to the External Benchmark Linked Rates (EBLR) will now have to pay a higher equated monthly instalment (EMI) on their loans once their lender increases the rate.

Home loan borrowers had a good time last year (2025) when the RBI cut the repo rate by 125 bps. It provided relief to borrowers with loans linked to the EBLR, mainly the repo rate-linked loans, since most home loans follow the Repo Linked Lending Rate (RLLR) benchmark. But soon, their loan EMIs will rise.

Banks may take a few weeks to some months to increase EBLR home loan rates. Here’s an illustration of how your home loan of Rs 25 lakh to Rs 2 crore with an outstanding tenure of 20 years will be impacted after a 25 bps interest rate hike.

How high home loan interest rates can impact your loans

Santosh Agarwal, Executive Director & CFO, Alpha Corp Development Limited, says while the move could marginally impact borrowing costs and financing sentiment, he do not expect it to significantly disrupt the underlying momentum in the real estate sector.

What should home loan borrowers do now

Shetty says that with the RBI saying cuts are off the table and the next step can only be a hike or a pause, borrowers should not plan around lower EMIs. "Many lenders extend the tenure to keep the EMI unchanged, which feels easier but costs more over time. Asking your lender how the change will be applied, and making a small prepayment each year can help limit the extra interest."

Monga says allocating annual savings or bonuses toward prepaying just one extra EMI each year can help offset the impact of the 25 bps hike.

How repo rate impacts home loan interest rates

The repo rate impacts home loan rates since it is the rate at which banks borrow money from the central bank. When the RBI increases the repo rate, banks get loans from it at a higher rate. Since banks spend more money on these high-rate loans, they transfer the increased costs to their borrowers by increasing interest rates on loans.

In India, most floating rate home loans are linked to external benchmarks like the repo rate. So, when the RBI increases the repo rate, these interest rates increase right away.