With the Reserve Bank of India (RBI) having hiked the repo rate twice in its bi-monthly policy meetings in the month of June and August, financial markets are anticipating another increase in the key repo rate during the fiscal.
The Monetary Policy Committee (MPC) had raised the repo rate by 25 basis points in both meetings. The repo rate is defined as the rate at which the RBI lends funds to other banks.
Banks having a lower credit rating than the RBI will be forced to increase their Marginal Cost of funds based Lending Rates (MCLR), subsequently rising interest rates on retail loans. Like all floating interest rate loan borrowers, the existing home loan borrowers will also be burdened by the increased EMIs.
In such cases, home loan borrowers can always consider making part-prepayments to reduce the total interest cost on the loan without being penalised. However, there are some aspects you can consider before making part-prepayments on your housing loan.
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