As the Indian economy shows signs of easing borrowing costs, key banks including SBI, HDFC Bank, Punjab National Bank (PNB), and Bank of Baroda have announced reductions in their home loan lending rates in August 2025. This move is expected to bring relief to prospective and current home loan borrowers through lower equated monthly installments (EMIs). Here’s an in-depth look at this important development and what it means for home loan customers.
Key Highlights Of The August 2025 Home Loan Rate Revision
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SBI has lowered its Marginal Cost of Lending Rate (MCLR) by up to 5 basis points from mid-August, which translates into reduced borrowing costs on home loans linked to this benchmark.
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HDFC Bank also cut its MCLR by 5 basis points across various loan tenures effective August 7, 2025, bringing down interest rates on MCLR-linked home loans.
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Bank of Baroda followed suit with a reduction in its MCLR rates by up to 15 basis points for different tenors, effective August 12, 2025.
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Punjab National Bank maintains competitive home loan rates starting as low as 7.45% p.a., with additional monsoon discounts available until September 30, 2025.
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These rate cuts come against the backdrop of the Reserve Bank of India (RBI) holding the repo rate steady at 5.55% in its August monetary policy review, suggesting that banks are proactively passing on earlier rate cuts to consumers.
Revised Lending Rates And Impact On EMIs
The revised MCLR rates impact floating rate home loans and those linked to respective benchmarks, which constitute a significant portion of home loan offerings.
SBI: The bank reduced its lending rates by 5 basis points effective August 15, 2025. After the cut, SBI home loan rates now start at 7.50% and rise up to 8.45%, depending on borrower profile and loan amount. This modest cut will likely result in a decrease in monthly EMI amounts for eligible customers in their reset cycles.
HDFC Bank: From August 7, 2025, the MCLR was decreased by 5 basis points on multiple tenors, including overnight, one-month, three-month, six-month, and one-year, with one-year MCLR seeing a notable cut from 9.05% to 8.70%. This reduction benefits borrowers by lowering the effective interest rate on outstanding loans that reset to MCLR.
Bank of Baroda: The bank’s MCLR now ranges from 7.95% to 8.80% across different tenors after a cut effective August 12, 2025 (e.g., overnight rate dropped from 8.10% to 7.95%). This decline makes the borrowing cost more affordable for new and existing floating rate home loan borrowers.
Punjab National Bank: PNB offers home loan rates starting at 7.45% with floating rates up to 9.35%. As part of the ongoing monsoon offer, an additional concession of 5 basis points is applied till September 30, 2025, allowing customers an even more attractive borrowing cost.
Why Are Banks Cutting Rates Despite RBI Holding Repo Rate?
Since February 2025, the RBI has cut the repo rate cumulatively by 100 basis points to stimulate economic growth and make credit cheaper. Though in August 2025 the central bank held the rate steady at 5.55%, banks are lowering MCLR and passing on benefits from previous rate cuts and improved liquidity conditions. These moves stimulate home buying activities and make loans more affordable amid competitive pressure.
What Borrowers Should Consider
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Borrowers with floating-rate home loans linked to MCLR or similar benchmarks stand to gain from these rate cuts, resulting in lower EMIs at their next reset period.
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Homebuyers planning to take a loan now can expect better interest rates, thus reducing the overall cost of borrowing.
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Existing borrowers can also explore balance transfers to banks offering these lower rates to optimize their loan cost.
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When evaluating loans, consider factors beyond interest rates such as processing fees, loan tenure, prepayment charges, and customer service quality.
Additional Points Of Note
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The reduction in lending rates is not uniform across banks, so comparing offers is essential for securing the lowest possible EMI.
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Even a 5 to 15 basis point cut can significantly impact long-term loan repayments due to compounded interest over extended tenures.
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Banks offering fee waivers on processing and documentation charges add to the overall savings for borrowers.
In Conclusion
August 2025 brings positive news for home loan seekers and current borrowers alike as major banks like SBI, HDFC Bank, Bank of Baroda, and PNB cut their lending rates. These reductions in MCLR and lending rates will help bring down EMIs, making home financing more affordable and accessible. Prospective borrowers should stay updated and consider acting soon to benefit from these favorable changes amid a cautiously stable lending rate environment.
Source: Economic Times, AngelOne, Financial Express, PNB official documents
