Matching SBI’s home loan rate cut, ICICI Bank on Monday cut interest rates on home loans of up to Rs 30 lakh by 30 basis points (bps), making housing loans by up to Rs 30 lakh to be available at an interest rate of 8.35 per cent for women and 8.40 per cent for others, down from 8.65 per cent and 8.7 per cent, respectively. HDFC also followed its rivals and reduced the interest rates by 15 bps to 8.35% for women borrowers and by 10 bps for men. HDFC has lowered its mortgage pricing for new low-cost home loans to 8.35% from 8.50% for loan below Rs 30 lakh for women borrowers and by 10 bps to 8.40% for men.
The lower interest on home loans means new loan buyers can take on bigger loans while existing loan holders can pay lower.
Banks have been reducing home loan rates post demonetisation despite RBI maintaining status quo on key rates since last three bi-monthly review cycles. “Over the last two years, there’s been a gradual lowering of lending rates led by the Reserve Bank of India. Then in April 2016, we saw the introduction of the MCLR-linked loans, which are more responsive to the RBI’s rate revisions, which is great for loan borrowers since they receive those rate cuts in a transparent manner. Then we had the demonetisation, following which banks have been proactively reducing interest rates, even though the RBI has kept the rates unchanged over three bi-monthly review cycles. Finance Minister Arun Jaitley has also announced sops for first-time home buyers in the form of subsidies and additional tax deductions. Now, we’ve had the RERA coming in and it is meant to safeguard the interests of home buyers. So this is a good time not just to take a loan but also to buy a home, ” said Adhil Shetty, CEO, Bankbazaar.com.
HDFC’s Keki Mistry while speaking to ET Now on home loan rate cut said he believes it is the best time to buy house as property prices have not gone up. “Demand for housing loan will remain strong. Have cut rates due to reduction in cost of funds,” he added.
A recent report by CLSA had said that mortgage rates have come down by 150 bps in the last two years and are now at 12-year lows, and this is gradually improving affordability.
After ICICI Bank cut the home loan rates ICICI Bank managing director Chanda Kochhar had said that the bank is committed to supporting the government’s vision to provide housing for all by 2022.
What a home-loan borrower should keep in mind:
1. When you include such costs as registration and stamp duty, the typical property purchase cost may be around 110-120% of the actual property price. Out of this, a bank, HFC or NBFC may provide you 80-90% of the property price as loan, subject to your repayment capacity. The rest needs to be raised by you.
2. Make sure you have a healthy credit history before applying for a loan. Typically, a CIBIL score of 750 or more allows you to access the cheapest loans. You don’t have to be in the dark about your credit score. You can get a free report every year through any of the credit rating agencies or through third-party credit report providers such as BankBazaar.
3. Make sure the paperwork and legality of your property is absolutely clear. You should engage a lawyer or property expert to ascertain this, even if it costs you a little money.
4. Typically, you need documents such as your previous income tax returns, salary slips, income proof, Form 16, details of existing loans etc. while applying for your loan. You can keep these documents ready. If you haven’t filed your ITR, you may do so urgently.