Finally, Reserve Bank of India (RBI) declared a cut in its main interest rate on Tuesday. As a result the banks will be pushed to provide home loans at lower interest rates.

Home loans will become cheaper as RBI cuts rates.

Home buyers finally heard the much-awaited good news when the Reserve Bank of India cut its main interest rate (Repo Rate) and cash reserve ratio (CRR). As the central bank cut the rates the impact will be on the subsidiary banks. They will be able to provide home loans at lower interest rates.

Home loans will become cheaper. The banks will remain capable of providing easier EMI loans (Equated Monthly Installments) to the home buyers. D Subbarao, Honorable Governor of RBI, said that the act of  RBI will boost the investments. He added that the RBI rate – cut will keep inflation in a moderate level. Further, the rate cut will improve liquidity and credit flow.

Home loans will be offered at lower interest rates.

On Tuesday, RBI announced 25 bps cut in Repo Rate and CRR. The Central Bank of India will now lend loans to the banks at 7.75% against the existing 8%. This will in turn enable the banks to offer loans at cheaper interest rates. People can now gain home loans, car loans, and corporate loans at lower interest rates.

However the existing borrowers may not benefit from the rate cut as the banks may be offering loans at renewed interest rates only to the new borrowers. There will not be any sudden fall in the existing EMIs, experts opined. However the existing customers can apply for a new loan to pay off the current one.

With the cut in CRR, the banks will be able to offer an additional Rs.18,000 Cr to the borrowers. Most of the fund will be lent in the form of home loans. IDBI Bank, a public sector lender- bank already announced a 0.25% cut in the interest rate of home loans and other loans. The new rate will come into effect on February 1. The public sector bank will offer the new loans at 10.25 % interest.