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RBI Pause: Refinance & Save on Loans
8 Apr
Summary
- RBI kept repo rate at 5.25%, offering a refinance window.
- A 45-year-old borrower can save ₹8 lakh by refinancing.
- Prepaying 10% can save over ₹12 lakh and cut tenure.
The Reserve Bank of India (RBI) has decided to keep the repo rate steady at 5.25%, creating a stable environment for borrowers.
This decision means immediate EMI reductions are unlikely, but it presents a valuable opportunity to adjust existing home loans. Experts suggest borrowers should leverage this pause to refinance or prepay to reduce long-term costs.
For a 45-year-old with a ₹40 lakh loan at 9% over 20 years, refinancing to 7.25% could save about ₹8 lakh in total interest, reducing monthly EMIs by nearly ₹3,900. Alternatively, a one-time prepayment of 10% (₹4 lakh) could save over ₹12 lakh in interest and shorten the loan tenure by four years.
Experts emphasize reducing loan tenure over lowering EMIs, especially for those in their mid-40s. Making regular annual prepayments, even 5-10% of the principal, can significantly decrease overall interest paid. Borrowers on older MCLR-based loans are advised to switch to repo-linked rates for better transmission of previous rate cuts.
