Brace for higher home loan EMIs as RBI hikes repo rate for 6th time in a row – here’s what it really means for borrowers

RBI Rate Hike News: The Reserve Bank of India (RBI) on Wednesday hiked the benchmark lending rate — repo rate by 25 basis points to 6.50 per cent to bolster the fight against inflation. The repo rate is the rate at which the central bank lends money to commercial banks. The decision paves the way for public and private sector banks, housing finance companies and other lending institutions to hike the interest rate on all kinds of loans. 

When banks and lending institutions will hike interest rates correspondingly, eventually existing and new borrowers will have to dole out higher EMIs for their loans.

Today’s hike is the 6th such hike since May 2022 when the central bank had hiked the repo rate by 40 bps in an off-cycle meeting of the six-member rate setting panel that marked a change in RBI’s track by shifting focus on prioritising inflation over growth.

RBI Governor Shaktikanta Das in his address today said that the MPC decided 4:2 vote to remain focused on withdrawal of the accommodative policy. 

With the latest increase, the benchmark lending rate has now hit a two-year high. Banks and lending institutions have already hiked interest rates on all kinds of loans after the RBI on May 4, 2022 increased the repo rate, the first such hike since August 2018. After today’s decision, the stage is set for lenders to follow suit as the cost of funds is bound to rise.

Let’s understand how the rate hike will impact your EMIs:


If you have borrowed a home loan of Rs 25 lakh at 7.05% per annum for a tenure of 20 years and the interest is hiked to 7.55%, your EMI will go up approximately by Rs 758 from Rs 19,458 to Rs 20,216. The total interest amount payable would be Rs 23,51,918 against Rs 21,69,819. For Rs 50 lakh, the EMI will increase by Rs 1,518 from Rs 38,915 to Rs 40,433 and the total interest payable would be Rs 47,03,840.


Likewise, if the interest rate is increased from 9% to 10% on an auto loan of Rs 7.50 lakh with a tenure of 7 years, the EMI will become costlier by Rs 400. 


Similarly, for a person who borrowed a personal loan of Rs 5 lakh at 13% per annum for a tenure of 5 years, the EMI, in case the interest rate is increased to 15%, would go up by Rs 518 from Rs 11,377 to Rs 11,895.

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