Banks have reduced their home loan floating interest rates to sub-7% levels, resulting in lower EMIs, following the RBI’s decision to cut the repo rate on multiple occasions in the recent past.
If you are planning to take a home loan or are already servicing one, this is probably a very good time to do both. Banks have reduced their home loan floating interest rates to sub-7% levels, resulting in lower EMIs, following the Reserve Bank of India’s decision to cut the repo rate on multiple occasions in the recent past.
After the central bank directed banks to link their lending rates to an external benchmark like the repo rate in October last, most banks have introduced a new loan regime, called repo-linked lending rates (RLLR) loans. Typically, the RLLR is determined by the repo rate (currently 4%) + bank’s margin + customer risk spread among other parameters depending on the bank’s terms and conditions. Since these loans are linked to the key policy rate, any change in the repo rate leads to a quick and proportional revision in the bank’s lending rates.
So, if you have the necessary margin money and your income channels are intact, you may want to go ahead and sign up for a home loan to avail of the lower EMIs. However, do ensure your home-buying expenditures do not impact your contingency funds and timely insurance premium payments during the ongoing Covid-19 crisis. If you’re servicing a Marginal Cost of Funds-Based Lending Rate (MCLR) or a Base Lending Rate (BLR) home loan, even your EMIs could come down following the recent repo rate cuts, according to BankBazaar.
However, you might have to wait a bit longer for the lower rates to come into effect until your bank revises its rates — assuming you have a clean repayment track-record. Also, you might consider transferring your MCLR or BLR loan to an RLLR loan to lessen your overall loan burden, decrease the number of EMIs payable, and become debt-free quickly.
That said, do factor in the cost of loan transfer like processing fees in your calculations and compare loan offers across different banks to find the best deal before finalising your decision. Besides, if your finances permit, see whether you can take advantage of these low rates by making adequate prepayments to lower your loan burden.
Another supercritical consideration should be your credit score. As mentioned earlier, the RLLR often includes a customer risk spread – meaning, the lowest interest rates are offered to the customers who have stellar credit scores (normally 750 and above). As such, check your credit score before applying for a home loan and take corrective measures to improve it if it is lower than 750 to get the best loan offers, informs BankBazaar.
What’s equally important is that you keep checking your credit score regularly throughout your loan tenure to see any drops and ensure you timely repay all your loan EMIs and credit card dues in full to keep enjoying the lowest possible home loan rates.
Here are the 10 banks — including the State Bank of India, HDFC, PNB, Bank of India and Union Bank of India — offering the lowest home loan interest rates this week. Also, do note the RLLR home loans are currently being offered only by banks and not the housing finance companies.
Disclaimer: List not exhaustive. Interest rates as advertised by lenders on July 13, 2020, on their websites. Interest rates are subject to revisions at the lender’s discretion. Actual or final interest rates are decided as per the borrower’s credit profile, loan-to-value ratio, size of the loan, gender, and other parameters as set by banks. Compiled by BankBazaar.com.