Why is it time to switch from MCLR and base rate to repo-linked home loans?

Interest rates have tumbled in 2025. The Reserve Bank of India (RBI) has already trimmed the repo twice: 25 bps in February and a chunky 50 bps in June, pushing the policy rate down to 5.50%, its lowest level since 2021. If your mortgage still rests on an older benchmark, you are missing out. Before you apply for a home loan top-up or a balance transfer, open a home loan eligibility calculator and see how today’s rate could shrink both your EMI and the total interest.

Why benchmarks matter more than headlines 

A mortgage price has two parts: benchmark and spread. With MCLR (Marginal Cost of Funds-based Lending Rate) or the base rate, the benchmark is your bank’s own internal number. With a repo-linked loan (often called RLLR/EBLR), the benchmark is the RBI’s repo. Because every cut in the repo flows through automatically, your instalment falls within three months—no haggling, no charges.

By contrast, the MCLR resets every 6–12 months, while a base-rate loan may move only when you prod the branch manager. It is no wonder that 60% of floating-rate loans are now repo-linked, yet almost 40% still sit on MCLR or older rates.

Slow-coach MCLR, creaky base rate

 Banks update the one-year median MCLR only once a month, and many mortgages wait a full year for their personal reset date. In April 2025, the median MCLR was 8.6%, unmoved even after February’s repo cut. Meanwhile, the repo has fallen by 75 bps this calendar year. If you stick with MCLR, you gift the bank several extra EMIs. Fire up a home loan eligibility calculator to see how much a faster reset could shave off your loan tenure before you apply for a home loan switch.

Faster transmission saves real money

When the repo fell by 50 bps on 6th June, borrowers on RLLR saw their interest drop in days. A loan of Rs. 50 lakh over 20 years slid from 8.10% to 7.60%, cutting the EMI by about Rs. 1,600 and the total interest by more than Rs. 3 lakh! Do that calculation using your home loan eligibility calculator before you apply for a home loan balance transfer; the numbers speak louder than sales pitches.

MCLR lag costs you twice

Because MCLR tracks the average cost of deposits, it falls only when term-deposit rates mature, often six to nine months later. Worse, if the RBI turns hawkish again, you will climb the hill in real time but roll down at half speed. A repo-linked loan moves symmetrically, protecting you in both cycles. So, when you plan a top-up or fresh home loan application action, insist on an RLLR quote and test it in a home loan eligibility calculator.

Crunching the change-over maths

● Switch fee: Rs. 15,000 (processing + legal)

● Net saving: Rs. 12 lakh—enough to clear three years of payments

Drop these figures into a home loan eligibility calculator; you will seldom see a clearer argument before you decide to port the loan.

How to apply for a home loan balance transfer in five easy steps 

Collect papers, such as the latest interest certificate, repayment track, and KYC.

Run the numbers by feeding them into a home loan eligibility calculator alongside the new rate.

Compare spreads and choose the lowest spread because it never changes.

Most banks let you apply for a home loan digitally; no branch visits.

Finish the agreement and let the new lender pay off the old one.

Total time for the process would be two to three weeks. However, the savings? Years off your debt. 

Should you pre-pay instead?

If your RLLR is already below 7.6% and you have spare cash, pre-payment may beat a transfer. Use the home loan eligibility calculator’s “part-payment” tab, then decide. If your rate is above 8%, switching is usually beneficial. The tip still applies when you apply for a fresh home loan; pick the cheapest benchmark first, then think about part-payments later. 

Beware of three hidden costs 

Low introductory spread: Some lenders lure you with a low spread that jumps after two years. Read the fine print before you click, ‘Home loan apply’.

Insurance bundling: A single-premium cover added to the principal will skew the home loan eligibility calculator output.

Administrative delays: Keep both lenders looped in; each day of overlap adds extra interest.

Digital tools make switching painless

Every major lender now lets you apply for a home loan on their app. You upload PDFs, e-sign the sanction, and track disbursal in real time. Most apps embed a home loan eligibility calculator so you can tweak tenure or top-up amounts without hunting for spreadsheets. Use that transparency to negotiate; if one lender offers a lower spread, show the screenshot to another.

Who should stay put?

If your loan is scheduled to finish in the next 18 months, or if the switch fee tops one per cent of the balance, the arithmetic may not work. Confirm with a home loan eligibility calculator before you apply for a change. Everyone else, especially borrowers on base-rate loans, stands to gain.

Key takeaway: Act now, not later

The RBI has front-loaded cuts in 2025, yet policymakers warn the window could close quickly. Waiting on an MCLR or base-rate mortgage erodes every rupee you save elsewhere. Fire up a home loan eligibility calculator, check the EMI under a repo-linked plan, then apply for a home loan. A two-week effort can knock lakhs off your interest bill and bring the dream of a debt-free home that much closer.