Repo rate cut indicates a reduction in the benchmark rate announce by the Reserve Bank of India. Repo or repurchase rate is altered to regulate the supply of money in a financial market. Repo rate cut is usually announced when there is an insufficient flow or availability of credit in the economy.
A reduced rate of repurchase will generate more amount of available funds for the lender. Thus, he will be keen to lend money to borrowers at lower interest rates. The credit flow in the economy would eventually be normalised.
Another factor to expect from RBI repo rate cut is a direct impact on borrowing trends, loan EMIs, and so on.
Understand the effect of a repo rate cut on housing loan EMIs
RBI repo rate cut results in a reduction of Marginal Cost of Fund-Based Lending Rate (MCLR), based on which home loans are disbursed. As a result, the interest rate on a home loan also becomes more affordable.
It can be said that repo rate cut plays a major role in determining the affordability of housing loans. Lower home loan interest rates make way for lesser home loan EMIs, thus increasing the demand for borrowing among individuals.
Current RBI repo rate stands at 4%. The interest rates levied on home loans by various lending institutions have been brought down as a result. You can now enjoy cheaper interest rates, pay lower EMIs, and save a considerable amount on home loan interest payoff.
