On 7 October 2026, RBI raised the repo rate after holding it at 5.25% since December 2025. If you have a floating-rate home loan, your EMI or tenure is likely to go up at your next reset. Many borrowers now ask one question: should I switch my loan? This guide shows what the hike changes, what switching can and cannot fix, and how to decide with real numbers.
What did RBI announce on 7 October 2026?
RBI's Monetary Policy Committee raised the repo rate by 25 basis points (0.25 percentage points) to 5.50%, by a unanimous vote. The repo rate is the rate at which RBI lends to banks. Before this, it had been 5.25% since a cut in December 2025, and RBI had kept it there at its April, June and August 2026 meetings.
- RBI changed its stance from "neutral" to "calibrated tightening". It said rate cuts are off the table in the near term, so the next move could be a hike or a pause.
- The reason given was inflation. RBI now projects consumer price inflation at 5.2% for 2026-27.
- The next policy meeting is scheduled for 2 to 4 December 2026.
Banks moved quickly. As of October 2026, Union Bank of India lists its home loan benchmark (EBLR) at 8.25% from 8 October 2026, and Bank of Baroda lists its repo-linked rate at 8.15% from the same date. Both work out to the new repo rate of 5.50% plus the bank's margin.
How much will the hike add to my EMI?
Your floating rate is a benchmark plus a spread (the lender's margin, set when the loan starts). For bank loans linked to the repo rate, a 0.25-point hike usually lifts your rate by 0.25 points at your next reset. RBI requires these external benchmark rates to be reset at least once every three months. Loans on MCLR (the bank's internal benchmark) change only when the bank revises its MCLR and your reset date arrives.
Take a loan with ₹50,00,000 outstanding and 18 years (216 months) left. The rate rises from 8.75% to 9.00%. EMIs use the standard formula:
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the amount outstanding, r is the monthly rate (yearly rate ÷ 12 ÷ 100) and n is the months left.
- EMI at 8.75%: ₹46,045. At 9.00%: ₹46,822, about ₹780 more each month.
- If the lender keeps your EMI at ₹46,045 and stretches the tenure instead, the loan runs about 226 months, 10 months longer.
Under RBI's reset rules for EMI-based floating loans, you can choose a higher EMI, a longer tenure or a mix at reset. A higher EMI usually costs less interest overall.
Will switching lenders protect me from the hike?
No. A repo hike raises the benchmark at every bank that links home loans to the repo rate. If you move to another repo-linked loan, the new loan carries the same 5.50% repo plus its own spread. What switching can do is lower your spread. That is the part you control.
So the real question is not "rates are rising, should I run?" It is "is my spread higher than what lenders charge someone like me today?" If you took your loan years ago, or your credit score has improved since, the answer may well be yes.
Is switching worth it? A worked example
Same loan: ₹50,00,000 outstanding, 216 months left, now at 9.00%. Suppose your own bank agrees to cut you to 8.50%, and another lender offers 8.25%. The costs below are assumptions for illustration:
- Own bank: a conversion fee of ₹5,000 plus 18% GST = ₹5,900. Lenders set their own conversion fees, so check your lender's current Key Facts Statement or schedule of charges.
- New lender: a processing fee of 0.50% (₹25,000) plus 18% GST = ₹29,500, plus an assumed ₹15,000 for legal, valuation and mortgage paperwork. Total ₹44,500. Stamp duty on the new mortgage varies by state.
| Option | Rate | EMI | Saving a month | Cost | Cost recovered in | Net saving over 216 months |
|---|---|---|---|---|---|---|
| Stay as you are | 9.00% | ₹46,822 | — | — | — | — |
| Own bank cuts your rate | 8.50% | ₹45,273 | ₹1,549 | ₹5,900 | About 4 months | About ₹3,28,764 |
| Switch to new lender | 8.25% | ₹44,507 | ₹2,315 | ₹44,500 | About 19 months | About ₹4,55,510 |
The net saving is the monthly saving × 216, minus the cost. It assumes both rates move together with the repo rate, so the gap between them stays the same, and that you keep the loan to the end.
Notice the middle row. Your own bank's cut recovers its cost in about 4 months. The switch saves about ₹766 more each month, but costs ₹38,600 more, so the extra saving takes about 50 months to pay off. If you might sell the house or close the loan within four years, the own-bank route may be the better deal. That is why asking your current bank first usually makes sense.
Should I move to a fixed rate after a hike?
A fixed rate protects you from further hikes, but it usually starts much higher. As of October 2026, Bank of Baroda lists floating home loan rates of 7.40% to 9.15% and fixed rates of 9.15% to 10.20% for salaried borrowers. Union Bank of India lists fixed rates (for up to 5 years) from 11.40%.
- On ₹50,00,000 over 216 months, a fixed 9.15% means an EMI of ₹47,292, against ₹44,507 at a floating 8.25%. That is about ₹2,785 more each month.
- For the fixed rate to come out cheaper, the floating rate would need to rise by more than 0.90 percentage points, about four more 0.25-point hikes, and stay there.
- Since an October 2025 amendment, offering a switch to a fixed rate at reset is the lender's option, under its board-approved policy, not a right. Check the conversion fee too.
Nobody can promise where rates go next. If a higher EMI would truly strain your budget, a fixed rate may give peace of mind. Otherwise, a floating rate with a low spread often costs less.
What should I do this week?
- Find your numbers. Check your benchmark, spread, next reset date and months left in your statement or app.
- Check your credit score. If it has improved since you took the loan, you have a strong case for a lower spread.
- Ask your bank in writing for its current rate for new borrowers like you, and the fee to move to it. If you are on MCLR or base rate, ask about moving to the repo-linked rate.
- Get two or three offers from other lenders, with the Key Facts Statement (KFS) for each. The KFS is RBI's required summary of the rate, fees and yearly cost.
- Choose a higher EMI, not a longer tenure, if you can afford it.
- Consider a part prepayment. Banks (since May 2014) and NBFCs (since July 2014) cannot charge prepayment penalties on floating-rate term loans to individuals. For non-business loans sanctioned or renewed from 1 January 2026, one RBI rule now covers all regulated lenders.
Lenders decide each request, and a cut is never guaranteed. But it costs little to ask.
Do it in 10 minutes, free
Enter your loan details once on LowerMyEMI. We draft a letter to your own bank and one email per lender asking for their best rate. You send them from your own email, with day-3 reminder and day-7 escalation texts ready. Then use the balance transfer calculator to check whether an offer beats your current loan after all costs.