Home Loan Interest Rates — Repo-Linked vs MCLR Explained

Your home loan's interest rate isn't fixed for life unless you specifically chose a fixed-rate loan — here's how the more common linked-rate system actually works.

Why Your Home Loan Rate Isn't Actually Fixed (Unless You Chose Fixed)

Most home loans in India today are floating-rate loans linked to an external benchmark — predominantly the RBI's repo rate under the Repo-Linked Lending Rate (RLLR) system. This means your interest rate, and therefore your EMI or tenure, can change over the life of your loan as that benchmark moves.

How Repo-Linked Lending Actually Works

Your home loan rate is set as the repo rate plus a spread (a margin the bank adds). When the RBI changes the repo rate, your lender is required to pass through that change, with resets happening at least once every quarter — meaningfully more transparent than the older MCLR system, which gave banks more discretion in timing.

MCLR — Still Relevant for Older Loans

If you took a loan before India's shift toward repo-linked lending, you may still be on an MCLR-based rate (Marginal Cost of Funds based Lending Rate), reflecting the bank's own cost of funds with a bank-set reset period. If current repo-linked rates look more favorable, this is exactly the situation a balance transfer addresses.

Side-by-Side

What Happens When Your Rate Changes

Lenders typically offer two adjustment paths: keep your EMI the same and extend or shorten the tenure, or keep the tenure the same and adjust the EMI. Which applies by default varies by lender — worth confirming directly.

What to Actually Do With This Information

• Confirm which benchmark your loan is linked to, and the specific spread charged on top of it
• Ask your lender directly what happens to your EMI/tenure at each reset
• If you're on an old MCLR loan, periodically compare against current repo-linked offers elsewhere
• Use the EMI calculator with your current rate periodically to see where your numbers stand after any reset