The year 2025 turned out to be a relief phase for home loan borrowers after a prolonged period of high interest rates. Following a series of policy moves by the Reserve Bank of India, lending rates began to soften, and many borrowers saw a reduction in their EMIs. As we move closer to 2026, a common question remains: will home loan interest rates fall further, or has the easing cycle already played out?
This article breaks down what happened to home loan interest rates in 2025, how banks transmitted RBI cuts, and whether borrowers should realistically expect lower EMIs in 2026.
Home Loan Interest Rates in 2025: What Changed for Borrowers
In 2025, the RBI’s accommodative stance signalled a shift from the tight monetary conditions of previous years. Repo rate adjustments gradually reduced the cost of funds for banks. As a result, most public and private sector lenders revised their repo linked lending rate structures, directly impacting home loan interest rates for borrowers under EBLR-linked loans.
Borrowers with MCLR-linked home loans also benefited, though the transmission was slower due to reset cycles. Those on older base rate loans experienced the least immediate relief, highlighting why loan linkage matters in determining EMI movement.
Home Loan Rates of Key Public and Private Banks
Home loan interest rates offered by banks vary based on borrower profile, credit score, and loan amount. Below is an indicative comparison of public and private sector lenders as seen in 2025.
Public Sector Banks
- State Bank of India: Rates linked to EBLR, starting lower for high-credit-score borrowers
- Bank of Baroda: Repo linked lending rate with periodic adjustments
- Punjab National Bank: Competitive rates with risk-based pricing
Private Sector Banks
- HDFC Bank: Combination of MCLR and repo-linked offerings
- ICICI Bank: EBLR-linked loans with faster rate transmission
- Axis Bank: Risk-based pricing influenced by credit profile
Actual rates differ across borrowers, but the trend in 2025 showed meaningful softening across most lenders.
Understanding EBLR, MCLR, and Repo Linked Lending Rate
To understand EMI changes, borrowers must distinguish between EBLR and MCLR structures. EBLR, or external benchmark linked rate, is directly tied to the RBI repo rate. Any repo cut leads to a quicker adjustment in loan interest rates.
MCLR, or marginal cost of funds based lending rate, adjusts less frequently. Rate cuts are passed on only during reset periods, which may delay EMI reduction. This difference explains why some borrowers felt immediate relief in 2025 while others did not.
Have Banks Fully Passed on the Benefit of Rate Cuts in 2025?
While banks did reduce lending rates in 2025, the transmission was not uniform. Borrowers linked to repo based systems saw faster and more transparent reductions. In contrast, MCLR-linked loans experienced partial pass-through.
Additionally, banks adjusted spreads and risk premiums to protect margins, meaning not every RBI cut resulted in a proportionate EMI reduction. This selective transmission remains a key reason borrowers should actively review their loan structure.
Has the RBI’s Rate-Cut Cycle Ended in 2025?
A critical question for 2026 is whether the RBI has room for further easing. Inflation trends, global interest rates, and domestic growth outlook will shape policy decisions. While aggressive cuts seem unlikely, limited and calibrated reductions cannot be ruled out if macroeconomic conditions support them.
For borrowers, this means expecting marginal relief rather than sharp drops in home loan interest rates in 2026.
Will Home Loan Interest Rates Fall in 2026?
Will home loan interest rates fall in 2026? The answer depends on two factors: RBI policy action and bank-level transmission. Even if the repo rate is cut further, the extent of EMI reduction will depend on whether banks pass on the benefit fully.
Borrowers on repo linked loans stand to gain the most. Those on MCLR or base rate loans may see slower or limited benefits unless they switch to newer structures.
Will Home Loans Get Cheaper for New Borrowers?
New borrowers entering the market in 2026 could access comparatively cheaper home loans, especially if competition among lenders intensifies. Banks often offer lower entry rates to attract high-quality borrowers with strong credit scores.
This environment also increases the availability of some of the cheapest home loans for borrowers who meet risk-based pricing criteria.
EMI Impact: How Lower Rates Translate for Borrowers
Lower interest rates reduce EMIs or loan tenure, depending on borrower preference. Many lenders automatically adjust EMIs, while others keep EMIs constant and reduce tenure.
Understanding this mechanism is essential when planning long-term finances, especially for borrowers managing multiple liabilities.
What Borrowers Should Do in 2026
Rather than waiting passively, borrowers should:
- Review whether their loan is EBLR or MCLR linked
- Evaluate refinancing or balance transfer options
- Monitor interest rate reset dates
- Recalculate EMIs to assess savings potential
Professional advice can help identify whether restructuring or switching lenders makes financial sense.
How CreditCares Helps Home Loan Borrowers
At CreditCares, we help borrowers navigate changing interest rate environments. Our advisory support focuses on evaluating eligibility, comparing lender offers, and aligning loan structures with long-term financial goals.
Whether you are an existing borrower seeking lower EMI or a new applicant looking for competitive rates, informed decisions can significantly reduce interest burden.
Frequently Asked Questions
Will EMIs fall automatically if interest rates reduce in 2026?
For repo linked loans, EMIs generally adjust faster. For MCLR-linked loans, changes depend on reset cycles.
Are home loan interest rates expected to rise again?
Rate movement depends on inflation and global factors. Sudden increases appear unlikely in the near term.
Should I switch from MCLR to EBLR?
Switching may improve rate transparency, but costs and long-term impact should be evaluated professionally.
Is 2026 a good time to take a home loan?
If rates remain stable or soften marginally, 2026 could be favourable for creditworthy borrowers.
Final Outlook for Home Loan Interest Rates 2026
The relief seen in 2025 has set a new baseline for home loan interest rates. While further sharp cuts are uncertain, marginal easing and competitive pricing could continue into 2026. Borrowers who stay informed and proactive stand to benefit the most.
For personalised guidance or to review your home loan options, you can connect with CreditCares for expert assistance.
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