If you paid attention in 2025, you saw the Reserve Bank of India (RBI) ease borrowing costs through the year. By December, the current repo rate stood at 5.25% after cumulative cuts of 125 bps in 2025, supporting lower EMIs for many floating-rate borrowers. That level is the key reference for most new floating home loans because banks price them to an external benchmark that closely tracks the policy rate.
But does the relief carry into 2026? Here’s what matters, so you can plan your next move with confidence.
Home loan relief – What you should know
Where rates stand today
● Repo (policy) rate: 5.25% as of the December 2025 Monetary Policy Committee outcome—the current repo rate your lender will be watching.
● Reverse repo: While not the active floor of the corridor since the Standing Deposit Facility (SDF) was introduced, the reverse repo rate today remains published at 3.35%. In practice, liquidity absorption now happens via SDF operations.
● What this means for you: Lenders anchor floating home loans to a benchmark that moves with the current repo rate, so policy direction is your first signal for EMIs. The reverse repo rate today is more of a reference point; it’s the SDF that functions as the operational floor in RBI’s corridor.
Why the transmission is still playing out
Even after headline announcements, lending rates move with a lag. Banks and housing finance companies reprice portfolios as their funding costs adjust and as they run regular resets on repo-linked loans (often every three months). That is why the repo rate cut you saw in late 2025 may still be filtering into your EMI during early 2026. If your rate reset is due this quarter, you could see the pass-through soon.
Tip: Check your sanction letter for the reset frequency, and match it against the current repo rate to estimate when your EMI changes will reflect.
EMI maths: Tenure vs. EMI
When policy eases, lenders typically keep the EMI constant and reduce the remaining tenure. If you prefer immediate cash flow relief, you can request the lender to reduce the EMI instead. Both options are influenced by the current repo rate, but the lifetime interest you pay will differ. The more you can keep the EMI steady (or even raise it a little) when the repo rate falls, the faster your principal shrinks.
What to watch in 2026
● Policy stance: Market commentary going into the new year has focused on whether the repo rate stays steady or sees marginal changes in the next few reviews. If inflation stays contained and growth holds, room for stability exists; if inflation surprises higher, the cycle could pause. Either way, the current repo rate level is already meaningfully lower than at the start of 2025, so your base is better than what it was twelve months ago.
● Liquidity operations: Overnight market rates hover between the SDF floor and the policy rate, depending on liquidity. This plumbing affects how quickly banks transmit changes. Remember, the reverse repo rate today is not the operational floor; SDF is. That nuance matters for transmission timing, even if it doesn’t show up directly in your loan agreement.
Practical moves for borrowers right now
A. Check your benchmark and spread
Your loan rate = benchmark (often a repo-linked internal benchmark) + lender spread. The benchmark moves with the current repo rate; the spread depends on your profile. If your spread is unusually high, ask for a review based on an improved credit score or lower loan-to-value—even if the repo rate is unchanged this month.
B. Compare takeover options
If you borrowed during a higher-rate window and your lender hasn’t passed on the full benefit of the lower current repo rate, consider a balance transfer. Weigh documented savings against processing fees, legal/valuation costs, and any conversion fees. A takeover makes sense only when the differential vs. the current repo rate gives you clear, net savings over your remaining tenure.
C. Decide EMI vs. tenure
When your lender re-prices after a repo rate move, ask them to keep the EMI unchanged and cut tenure if you can afford it. This small choice can save you lakhs over time. If cash flow is tight, take the EMI reduction—and plan part-prepayments when bonuses arrive.
D. Use part-prepayments smartly
Combine a lower repo rate with periodic prepayments (even 1–2 EMIs extra per year). Target prepayments early in the tenure to reduce interest outgo meaningfully. Most floating-rate loans to individuals allow part-prepayment without penalties—check your terms and conditions.
How “reverse repo rate today” fits into your picture
You will often see headlines quoting the reverse repo rate today, but for your home loan, the repo path and SDF operations matter far more. Since SDF is the active floor of the liquidity corridor, banks’ overnight rates tend to gravitate between SDF and the current repo rate, shaping funding conditions and, eventually, your loan resets. The reverse repo rate today (3.35%) is published, but not the instrument the RBI uses day-to-day for absorbing liquidity after 2022.
In short, track the current repo rate for EMI direction, note the reverse repo rate today for context, and watch liquidity commentary for transmission speed.
Salaried vs. self-employed: Who benefits more?
Both groups benefit when the repo rate falls, but salaried borrowers often see sharper pricing because of perceived income stability and lower risk weights. If you are self-employed, strengthen your case with clean bank statements, steady GST filings, and a lower loan-to-value ratio. These steps can improve your spread even if the current repo rate holds steady this quarter.
New borrowers in 2026: How to lock a good deal
● Start with eligibility: A strong credit score (750+) can shave your spread by several basis points, sometimes more than a small tweak in the current repo rate.
● Pick the right tenure: Choose the shortest tenure you can comfortably service. Use the current repo rate advantage to finish the loan earlier rather than stretching for a slightly smaller EMI.
● Avoid unnecessary add-ons: Insurance is important, but bundled products should be compared outside the loan to avoid higher effective costs.
● Read the reset clause: Ensure your rate reset aligns quickly with changes in the current repo rate (e.g., quarterly resets), rather than long lags.
The bottom line
The big relief already happened in 2025 as the repo rate moved down to 5.25%. Whether 2026 adds incremental cuts or simply consolidates at this level, you’re starting the year from a better base. Focus on what you can control: tighten your spread, align your reset frequency with the current repo rate, and use prepayments to cut tenure. The reverse repo rate today is a useful line in RBI’s toolkit, but for your home loan decisions, the policy repo and your lender’s transmission are the levers that matter.
