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RBI cuts key rate by 25 bps; will Home loans become cheaper; read to know

With the six member monetary policy committee headed by the Reserve Bank Governor Shaktikana Das the Committee has decided to reduce the repo rate by 25 basis points to 5.57 percent.

Reports have been asserted that The real estate and auto sector are likely to get a major boost.

It is the third consequent cut rate.

WHAT IS REPO RATE?

Reporate is the interest rate at which the RBI lends money to banks. When the cost of borrowing goes down for bank they can choose to lower their marginal cost of funds Which is MCLR, which is the minimum interest rate that a bank will charge on the loan and directly impacts your EMIs.

The MPC’s decision will favor for home loans to make cheaper soon.

For instance, consider a Rs 25 lakh home loan for a 10-year tenure. The current interest rate offered by SBI is in the 8.55-8.75 per cent range. This translates into an EMI of about Rs 31,332 at the highest interest rate. If the full benefit of the repo rate cut is passed on and the new interest rate comes down to 8.5 per cent, the EMI outgo will come down to around Rs 30,996. That may not seem like much but the total reduction in your interest payable is over Rs 40,200. Moreover, the bigger the loan amount, the higher the benefit for home loan takers.

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