LIC Housing Finance Lowers Home Loan Rates as RBI Cuts Repo Rate

In a move that is expected to make home loans more affordable for millions, LIC Housing Finance has reduced its prime lending rate by 25 basis points. The change comes shortly after the Reserve Bank of India (RBI) cut the repo rate to 6%, marking the second such cut this year.

This latest rate revision will be effective from April 28, 2025, and will apply to both new and existing borrowers of LIC Housing Finance. With the revised rates, home loan interest now starts at 8%, offering significant savings to borrowers.

What the New Rates Mean for Borrowers

The reduction in lending rates is expected to ease the financial burden on households and boost homebuyer sentiment, particularly in the affordable housing segment. This move is in line with broader efforts by the RBI to stimulate economic activity and increase credit flow.

“The interest rate cuts are in line with the RBI’s decisions and current market scenario. We believe this move will boost consumer sentiments and stimulate housing demand,” said Tribhuwan Adhikari, MD & CEO of LIC HFL.

Expert Take: Savings Depend on Loan Type

Industry experts have welcomed the decision, noting that the real benefit for borrowers depends on the type of loan they have.

“The RBI’s repo rate cut is a welcome step toward easing financial pressure on households,” said Siddarth Jain, CFO at MinEMI. “While banks have started lowering home loan rates, the real benefit depends on the borrower’s loan structure.”

He added that RLLR-linked borrowers (Repo Linked Lending Rate) will see automatic reductions on their reset dates, while MCLR or fixed-rate borrowers may need to initiate a switch or refinance.

A smart strategy, according to Jain, is to keep EMIs constant even as interest rates drop. This helps reduce the loan tenure significantly and results in large savings in interest payments over time.

How Much Can You Save? (EMI Comparison)

Here’s a simple breakdown of how a 0.25% interest rate reduction can impact your monthly EMI and total repayment:

For a ₹20 Lakh Loan Over 20 Years

For a ₹30 Lakh Loan Over 20 Years

Note: These calculations are based on standard EMI formulas and may vary slightly depending on lender terms and processing fees.

Conclusion

The reduction in home loan rates is a welcome development for both prospective and current borrowers, especially those considering buying a home in the near future. As more banks follow suit, this could lead to increased activity in the housing market, particularly in urban and semi-urban areas.

Borrowers are advised to check their loan types (RLLR, MCLR, fixed) and speak with their lenders about the best ways to take advantage of the new rates.

FAQs

1. What is the new home loan interest rate by LIC Housing Finance?

LIC Housing Finance has reduced its lending rate, and home loan interest now starts from 8% after the latest revision.

2. Why did home loan rates decrease recently?

Rates dropped after the Reserve Bank of India cut the repo rate to 6%, making borrowing cheaper for lenders and customers.

3. When will the new interest rates be effective?

The revised home loan rates will be applicable from April 28, 2025, for both new and existing borrowers.

4. Who will benefit the most from this rate cut?

Borrowers with RLLR-linked loans will benefit the most, as their interest rates adjust automatically with repo rate changes.

5. Do existing borrowers need to take any action?

It depends on the loan type. MCLR or fixed-rate borrowers may need to switch or refinance to enjoy lower interest rates.

6. How much EMI savings can borrowers expect?

A 0.25% rate cut can reduce EMI by around ₹300–₹470 and save up to ₹75,000–₹1.1 lakh in total interest over time.

7. What is the best strategy to maximize savings after a rate cut?

Keeping your EMI constant instead of reducing it can shorten your loan tenure and significantly lower total interest payments.