Mortgage Rates in India 2025: Full Report on Interest Rate Trends

Current Interest Rate Situation

1. RBI’s Monetary Policy:

   • In June 2025, the Reserve Bank of India (RBI) reduced the repo rate by 0.50% to 5.50%.

   • It also lowered the Cash Reserve Ratio (CRR) to improve liquidity in the banking system.

2. Home Loan Rates Offered by Banks (as of Sept 2025):

   Bank / Lender	Starting Interest Rate (per annum)
   Bank of India, Union Bank, Central Bank, BOM	~7.35%
   State Bank of India (SBI)	~7.50%
   HDFC Bank	~7.90% onwards
   Axis Bank	~8.35% – 9.10% (depends on credit score)

3. Trend in Rates:

   • For the last two years, rates were climbing because of high inflation.

   • Now, with inflation cooling down and RBI cutting policy rates, mortgage rates are slowly moving downwards.

   • Many public sector banks have already reduced home loan interest rates to attract new borrowers.

Why Are Rates Changing?

1. Lower Inflation Pressure – With prices stabilizing in food and fuel, RBI got room to cut rates.

2. RBI Policy Shift – The central bank moved to a more neutral stance and made borrowing slightly cheaper.

3. Bank Competition – Banks and housing finance companies are cutting rates to attract more customers, especially those with good credit scores.

4. Global Factors – Rising global bond yields and currency movements also influence India’s borrowing costs.

Impact on Borrowers

• Monthly EMI: Even a 1% change in interest rate can make a huge difference in your monthly EMI.

• Total Loan Cost: Higher rates mean you end up paying lakhs more over the loan tenure.

• Affordability: Lower rates encourage more people to buy homes, while higher rates push buyers to delay decisions.

• Real Estate Market: Falling rates usually give a positive boost to housing demand.

What’s Next? (Future Outlook)

• If inflation rises again, RBI may increase rates.

• If growth slows down, more rate cuts are possible.

• Borrowers with strong credit profiles will continue to enjoy the lowest rates.

• Hybrid products (mix of fixed + floating interest) may become more popular.

Smart Tips Before Taking a Home Loan

1. Maintain a Good Credit Score – Better score = better rates.

2. Choose Tenure Wisely – Shorter tenure = less total interest, though EMI will be higher.

3. Fixed vs Floating – Fixed gives stability, floating can benefit if rates fall.

4. Compare Banks – Don’t just look at interest rates, check fees and prepayment charges too.

5. Consider Balance Transfer – If another bank offers a much lower rate, transferring your loan can save you money.