Indian banks lift home loan rates after RBI repo hike

what happened

According to Moody's, the Reserve Bank of India raised its repo rate by 25 basis points to 5.50% on October 7. Because many home loans are tied to that rate, lenders are revising their own pricing. State Bank of India, the country's largest state-run bank, increased its external benchmark linked rate (EBLR) from 7.90% to 8.15%, effective October 15, 2026, which makes floating-rate mortgages more expensive.

Borrowers who want a lower rate face extra costs. Switching even within the same bank often triggers a conversion or repricing fee, usually between 0.25% and 0.5% of the outstanding balance plus 18% GST, though some lenders charge a flat amount. On a balance of 60 lakh rupees, a 0.5% fee would come to 30,000 rupees. HDFC's schedule for certain fully drawn loans sets the fee at 0.25%, capped at 5,000 rupees plus taxes, while Kotak Mahindra charges 0.5%, capped at 10,000 rupees plus taxes, for switching between floating-rate schemes.

why it matters

For markets, the episode shows how quickly central bank rate moves pass through to consumer borrowing costs in India. Pricier mortgages may cool demand for home loans, and the total cost of changing lenders matters for borrowers weighing refinancing.

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