The Reserve Bank of India (RBI) in its October 2021 bi-monthly meeting of the Monetary Policy Committee kept the repo rate unchanged at 4 per cent. The home loan and car loan borrowers paying EMIs based on the flexible interest rate will continue paying almost the same rate of interest as applicable to them currently. Most banks are currently offering home loans starting at an interest rate of around 6.5 per cent. For those looking to get a home loan to buy their home, the interest rate environment appears conducive for them.
“For homebuyers, the low home loan interest rates regime will continue in the market and help foster housing demand during the ongoing festive season. Notably, this is a period when housing sales usually surge on the back of attractive offers by developers and lending banks. The green shoots of economic revival coupled with the prevailing low interest rates will be conducive for the residential sector in the short to mid-term. ANAROCK Research indicates that we may see at least 10-15% growth in housing demand in the ongoing festive period (Oct.-Dec) across the top 7 cities against the preceding quarter. In Q3 2021, the top 7 cities saw total housing sales of nearly 62,800 units – already the best quarterly sales since the pandemic” says Anuj Puri, Chairman – ANAROCK Group.Related News
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Most leading banks are already offering low interest rates for new takers of home loans. For most banks, the fresh home loans are based on the bank’s Repo Linked Lending Rate (RLLR), also referred to as an external benchmark rate (EBR). The banks, however, may not offer loans on their RLLR but depending on the loan amount and other factors, the effective rate may differ. On an average, for the majority of borrowers based on the loan amount, profession, gender etc, the home loan interest rate is 7 per cent or even higher across most banks.
“We welcome RBI’s status quo on policy rates. This will mean a continuation of low home loan rates, which will keep the demand momentum for homes going. In the past couple of months, we have witnessed further reduction in interest rates of home loans to 6.5% per annum by leading financial institutions,” says Amit Goyal, CEO, India Sotheby’s International Realty.
“Home loan interest rates have already gone down substantially in the recent past, and are presently at an all-time low and property prices have been stable. The move to reduce interest rates by few banks recently is encouraging and will pave path for robust housing demand further. We are seeing a lot of first time home buyers, who were not able to reach a decision in the previous quarters due to the lockdown are eager to conclude the deal now,” says Ramani Sastri – Chairman & MD, Sterling Developers.
Bank of Baroda has announced a reduction of 25 bps in its home loan rates from 6.75% to 6.50% starting from October 7, 2021, which will be available till December 31, 2021 with no processing fees.
LIC Housing Finance has extended its lowest home loan rates of 6.66% for loans up to Rs 2 crore for all borrowers having CIBIL score of 700 and more irrespective of being salaried or professional/self-employed. The offer is available for loans sanctioned from 22nd September till 30th November 2021. The processing fee is a maximum of Rs 10,000 or 0.25% of the loan amount, whichever is lower for loans up to Rs 2 crore.
Kotak Mahindra Bank has reduced its Home Loan interest rates by 15 basis points (bps) from 6.65% to 6.50% per annum on loans availed till 8th November 2021. The Kotak Bank Home Loan interest rate starting at 6.5 per cent will be applicable for all fresh home loans as well as on refinanced or balance transfer loans from other banks.
SBI is offering credit score linked home loans at just 6.70%, irrespective of the loan amount. This interest rate is also applicable to balance transfer cases. The Bank is also waiving off processing fees and also the Waiver of occupation linked interest premium for the home loan borrowers.
Country’s biggest mortgage lender HDFC is offering home loans starting from 6.70 per cent for all loan slabs and for all customers with credit score of 800 and above. One can avail HDFC Home Loan starting at 6.70 per cent per annum till October 31. The offer will be applicable to all new loan applications irrespective of the loan amount or employment category.
Since October 1, 2019, RBI has mandated banks to offer retail loans such as home and auto loans linked to an external benchmark, which for most banks is the RBI repo rate. Every time, RBI revises the repo rate, the revision in the interest rate is much quicker in RLLR for the borrower compared to the loans linked to MCLR. The Marginal Cost of Funds based Lending Rate (MCLR) was introduced from April 2016. Among other factors, the MCLR is based on the bank’s own cost of funds.
Even those borrowers who are paying EMI based on MCLR may see some revision in their monthly installments as and when their reset-date comes. If you are a borrower with a loan linked to Marginal Cost of Funds based Lending Rate (MCLR), the fall in MCLR will help you pay lower EMIs on your loan as and when your reset-period comes up. Some banks such as Canara bank, Punjab National Bank have reduced their MCLR recently.
Existing borrowers who have already taken a loan taken before October 1, 2019, may continue with their loans linked to Marginal Cost of Funds based Lending Rate (MCLR) and not switch to Repo Linked Lending Rate (RLLR). The MCLR loans can be switched to RLLR but one should carefully evaluate the cost-benefit before doing so. This may incur a cost and hence consider the remaining tenure of the loan before taking this step. Before switching, one may wait for a few more months to get a clear picture of the interest rate movement.
Choose a lender that offers a low rate of interest based on your profile. Even a 100 basis points reduction can help you to save a few lakh in interest cost, depending on the remaining tenure of the loan. Assuming a home loan of Rs 40 lakh for 15 years, the savings in EMI and interest ( On 200 basis points fall) will be:
EMI Saved – Rs 4163 ( Annually Rs 49,956)
Total interest saved – Rs 7.49 lakh
Another way to keep the interest burden low is to keep prepaying principal on regular intervals. It is better to prepay every 6 months or on an annual basis so that the outstanding principal amount comes down much early. Any such prepayments should ideally be done in the initial stages of the loan as interest cost is more during the first few years of the loan. You may use a home loan repayment calculator to know how much the savings will be.
New home loan borrowers
New borrowers may explore a few bankers and ask for the effective home loan interest rate based on their loan amount and period of loan. As and when the repo rate goes up, the borrowers paying EMI on loans linked to RLLR will be impacted much quicker than those loans linked to MCLR. Therefore, remember, whether it’s MCLR or RLLR home loan, keep a prepayment plan handy to repay the loan amount as early as possible. The earlier you repay the loan, the lower will be the interest burden for you.
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Source : https://www.financialexpress.com/money/rbi-keeps-key-rates-unchanged-these-banks-offering-home-loans-at-multi-year-low-interest-rates/2346200/1688