How Things Stand for Home Loan Borrowers After Lenders Slashed Lending Rates in Response to 0.75% Repo Rate Cut?
Last Updated : April 22, 2020, 11:01 a.m.
The Reserve Bank of India (RBI), after taking stock of the emergency caused due to the COVID-19 pandemic, decided to cut the repo rate by a massive 75 basis point (100 basis points=1%) to 4.40% on March 27, 2020. The action from the RBI is making banks and housing finance companies (HFCs) cut their lending rates. Although HFCs don’t price loans based on the external benchmark that their banking counterparts do, they have been able to keep their rates competitive, hence taking the rate cut war to a different level. With lenders busy cutting the rates, it’s time for borrowers like you to rejoice and save on your interest outgo. Exciting opportunities like a balance transfer awaits you in this rate cut race. So, we will first see the rates that have come down across lenders before figuring out the gains ahead of you.
SBI Home Loan Rates Now Start from 9.15%
State Bank of India (SBI), the country’s premier lender, has decided to slash the lending rate to as low as 9.15% per annum. And, the maximum rate is 8.00%. But how does the rate stand across the loan amounts? Check out the table for the same.
| CIBIL Score | Interest Rates for Women (p.a.) | Interest Rates for Others (p.a.) |
|---|---|---|
| >=800 | 8.80% | 8.85% |
| 750 - 799 | 8.80% | 8.85% |
| 700- 749 | 8.90% | 8.95% |
| 650 - 699 | 9.40% | 9.45% |
| 550 - 649 | 9.60% | 9.65% |
| NTC/NO CIBIL/-1 | 9.00% | 9.05% |
HDFC Home Loan Rates Have Fallen to as Low as 7.85%
The country’s premier mortgage player HDFC Limited has also slashed interest rates to woo borrowers. With the latest rate cut, HDFC home loan rates have come down to as low as 7.85% per annum. Check out the table below to know the rates that apply to different loan amounts.
| Loan Amount (In INR) | Salaried & Self-employed Professionals | Self-employed Non-professionals |
|---|---|---|
| Upto 30 Lakh | 7.85%-8.35% | 8.00%-8.50% |
| Above 30 Lakh-75 Lakh | 8.00%-8.50% | 8.15%-8.65% |
| Above 75 Lakh | 8.10%-8.60% | 8.25%-8.75% |
ICICI Bank Home Loan Interest Rates Have Fallen to as Low as 8.10%
The private banking leader ICICI Bank has also cut the home loan rates. As a result, the lowest home loan rate at ICICI now stands at 8.10%, with the highest being 9.20%. You can check the rates across different loan amounts in the table below.
| Loan Amount (In INR) | Salaried | Self-employed |
|---|---|---|
| Upto 35 Lakh | 8.10%-8.75% | 8.35%-9.00% |
| Above 35 Lakh-75 Lakh | 8.25%-8.90% | 8.45%-9.10% |
| Above 75 Lakh | 8.45%-9.10% | 8.55%-9.20% |
LIC Home Loan Can Now Available at as Low as 8.50%
LIC Housing Finance has also cut rates for home loan borrowers. The rates differ for salaried and other segments based on the loan amount they apply for and the CIBIL score they have.
| Loan Quantum (In INR) | CIBIL Score | Salaried & Professionals | Non-Salaried & Non Professionals |
|---|---|---|---|
| Up to 2 Crore | >=700 | 6.66% | 6.76% |
| 650-699 | 7.10% | 7.20% | |
| 600-649 | 7.30% | 7.40% | |
| <600 | 7.50% | 7.60% | |
| Above 2 Crore to 3 Crore | >=700 | 7.10% | 7.20% |
| 650-699 | 7.40% | 7.50% | |
| 600-649 | 7.70% | 7.80% | |
| <600 | 7.70% | 7.80% | |
| Above 3 Crore to 15 Crore | >=700 | 7.20% | 7.30% |
| 650-699 | 7.50% | 7.60% | |
| 600-649 | 7.70% | 7.80% | |
| <600 | 7.80% | 7.90% |
How Much Has Bank of Baroda Home Loan Interest Rate Fallen Post the Repo Rate Cut?
Bank of Baroda, one of the largest public sector banks, has reduced the rates in line with the repo rate reduction. As a result, the lowest rate here is 7.25% per annum, which happens to be the benchmark rate of the bank. The benchmark rate is denoted by BRLLR. The table below shows the rates across different credit scores (CIBIL).
| CIBIL Score | Interest rate for Salaried | Interest Rate for Non-salaried |
|---|---|---|
| 800 and above | 6.75% | 6.85% |
| 771 and above but less than 800 | 6.75% | 6.85% |
| 751 and above but less than 771 | 6.85% | 6.95% |
| 726 and Above but less than 751 | 7.00% | 7.10% |
| 701and Above but less than 726 | 7.10% | 7.20% |
| Less Than 701 | 8.10% | 8.20% |
| (-1) | 7.10% | 7.20% |
| Staff Members (Public Scheme) | 6.75% | N.A. |
Note – Bank staff members can get the loan at the lowest rate of 7.25% per annum.
PNB Home Loan Interest Rates Fall to as Low as 7.20%
Punjab National Bank, another public lender, has eased the home loan rates across loan amounts and based on the credit score. As a result, the lowest rate here stands at 7.20%.
| Loan Amount (In INR) | PNB Pride (Irrespective of Credit Score) | Credit Score of 750 and Above | Credit Score of 700 and Upto 749 | Credit Score of Less Than 700 |
|---|---|---|---|---|
| Upto 30 Lakh | 7.20% | 7.20% | 7.35% | 7.45% |
| Above 30 Lakh-75 Lakh | 7.45% | 7.35% | 7.60% | 7.70% |
| Above 75 Lakh | 7.45% | 7.35% | 7.70% | 7.80% |
Does the Rate Cut Present an Opportunity of Balance Transfer?
You could see the rates have fallen to 7.15% to below 9% per annum following the RBI’s repo rate cut. If you are servicing the home loan somewhere at a rate of more than 2%-3% more than what you see here, you can think of a balance transfer to the lender that agrees for a lower rate deal. However, if the difference in the rate is 1% and the lender has not cut the rate after the latest repo rate cut, just wait for some time. Your lender could reduce the rate too. If that does not happen, switch your loan portfolio to another lender at a lower rate.
The reason why a balance transfer is important in home loans is because of the fact that even a difference of 0.50%-1% can bring a significant difference to the interest outgo. For example, you are servicing a 20-year home loan of say 60 lakh at 8.90% per annum for the last 2 years. And, if we see the rates that prevail now, you could get a balance transfer deal at 7.80%-8.30%. In case the lender agrees at 8.20%, how much will the interest reduce?
| Home Loan Repayment Aspects | Details |
|---|---|
| Original Loan Amount | 60,00,000 |
| Tenure | 20 Years |
| Original Interest Rate | 8.90% |
| EMI @ 8.90% | INR 53,598 |
| Estimated Interest Outgo @8.90% Over 20 Years | INR 68,63,587 |
| Outstanding Loan Balance | INR 57,61,963 |
| Interest Paid Over 2 years | INR 9,21,668 |
| New EMI @ 8.20% | INR 51,114 |
| Estimated Interest Outgo @8.20% Over 18 Years | INR 52,78,749 |
| Interest Paid Over 2 Years + Estimated Interest Outgo for the Remaining 18 Years | INR 62,00,417 |
| Reduction in the EMI via a Balance Transfer | INR 2,484 |
| Reduction in the Interest Outgo via a Balance Transfer | INR 6,63,170 |
So, you could see substantial savings in store for you with a balance transfer. The lender where you want to switch the outstanding loan can ask for a nominal fee to execute the balance transfer.