Lower lending rates ahead? From ICICI to SBI, your home loan rate check

By Admin

06 Dec, 2025

India’s housing finance market is buzzing with anticipation after the Reserve Bank of India (RBI) announced a 25-basis-point cut in the repo rate from 5.50% to 5.25%. This policy shift, though subtle, carries the potential to reshape home loan interest rates over the next few months, influencing both new buyers and existing borrowers.

Repo Cut Likely to Ease Borrowing Costs

Home loans across India are currently linked to three major benchmarks:

1. Base Rate
   
   

2. Marginal Cost of Funds-based Lending Rate (MCLR)
   
   

3. External Benchmark Lending Rate (EBLR)
   
   

Among these, EBLR-linked loans experience the fastest and most transparent transmission of policy rate changes. Since the repo rate is part of this external benchmark, borrowers with repo-linked home loans are likely to feel the benefits sooner.

However, MCLR-linked loans often move slowly. A 25-basis-point cut may translate into only a 10-basis-point reduction in MCLR for some banks, depending on their cost structure and internal pricing timelines.

Highlighting the broader market impact, Jeet Mukesh Chandan, Group Managing Director at BizDateUp, said the latest cut would “boost confidence from homebuyers to institutional investors, driving demand, accelerating transactions, and stabilising valuations across the ecosystem.”

Borrowers May Have to Wait for Full Transmission

While repo-linked loan borrowers may see faster relief, those tied to MCLR or base-rate systems may need to wait until their next reset cycle.

Santosh Agarwal, CEO of Paisabazaar, explained that the repo cut “would bring more relief to both prospective and existing home loan borrowers,” emphasizing that transmission is typically quicker for floating-rate loans under the external benchmark system. For MCLR-linked loans, the timing “would depend on the interest reset dates set by their lender.”

He added that borrowers generally get two choices when interest rates fall:
• Reduce their EMI amount, or
• Keep EMIs unchanged and shorten the loan tenure.

Agarwal also noted that as banks gradually pass on these benefits, the coming months could witness stronger credit demand, improved liquidity and a more confident lending environment.

Current Home Loan Interest Rates by Major Banks

Even as the new repo rate stands at 5.25%, most banks are still offering home loans based on the older 5.50% benchmark. Updated rates are expected soon.

Here’s where major lenders currently stand:

• HDFC Bank: 7.90% – 13.20%
• ICICI Bank: 8.75% – 9.80%
• Axis Bank:
– 8.35% – 9.10% (credit score above 751)
– 8.60% – 9.35% (credit score below 751)
• SBI: 7.50% – 8.70%; EBLR at 8.15%
• Canara Bank: 7.40% – 10.25%; benchmark lending rate starts at 8.25%

These numbers are expected to move downward in line with the fresh repo cut.

What Borrowers Can Expect Next

While some banks may react swiftly with revised rates, others could take several weeks. However, the overall direction is unmistakable home loans are likely to get cheaper.

With the RBI signalling a softer interest-rate environment, affordability is set to improve. This could lead to a surge in housing demand, faster decision-making by buyers, and increased refinancing activity among existing borrowers.

As the new rate cycle unfolds, both banks and borrowers will closely watch how quickly the benefits of the repo cut ripple through India’s lending ecosystem.