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Good News for the all those who are want to buy car buy a house as rates are going to come down soon after Reserve Bank of India Bank of India's, or RBI's, decision to cut the repo rate by 25 basis points or bps to 7.75 per cent on January 15, much ahead of the February 3 policy review.

The cut in the rate at which banks borrow from the RBI for short-term needs is the first in 20 months. The last cut (from 7.5 per cent to 7.25 per cent) happened in May 2013; the rate was increased two times (by 25 bps each) after that.

The out-of-turn given hope to the consumers that RBI has reversed the interest rate cycle and further rates cuts are on the horizon in 2015.

We believe this is the beginning of a big rate cut cycle. We expect a further 125 bps cut over the next 12 months, a cumulative 150 bps in this cycle, if CPI (consumer price inflation) stays closer to 5 per cent in most of 2015," Morgan Stanley said after the RBI's decision.

"The lending rate cut depends on deposit rates. As and when deposit rates come down, lending rates will also fall. Some banks have already cut deposit rates. When the impact of the same is seen on the credit cost, the rates will come down," says Ashish Parthasarthy, treasurer, HDFC Bank. According to Parthasarthy, most banks will start cutting rates before March.

Meanwhile, the latest repo rate cut and expectation of more rate cuts this year have stoked bullish sentiment in the bond market.

AW: Arun Kumar