Acche din for home buyers as SBI, other lenders slash rates

Home loan borrowers can expect to see a decline in their monthly EMIs after three of the country's biggest lenders slashed interest rates aggressively last week.

The country's biggest lender State Bank of India set the ball rolling by reducing rates on housing loans by 15 basis points to the lowest in six years, and private sector lenders ICICI Bank and HDFC joined the wagon with similar cuts.

SBI continues to offer the lowest interest rates under its recent offer of 9.15 per cent for loans up to Rs75 lakh sanctioned in November and December this year.

The private lenders now offer interest rates at 9.2 per cent for home loans up to Rs75 lakh, down from 9.35 per cent earlier. For loans beyond Rs75 lakh, the interest rate has been revised downwards to 9.25 per cent for women borrowers and 9.3 per cent for others. This offer is valid for all home loans taken up to 30 November. All three banks offer 5 bps lower interest rates to women borrowers.

Other lenders are expected to follow suit and slash their home loan rates. This may also be a good time for existing home loan borrowers to consider switching their mortgage to another lender. For instance, on a home loan of Rs50 lakh, reduction in interest rate by 0.15 per cent by SBI will help a home buyer to save Rs542 per month and approximately Rs2 lakh during the loan tenor of 30 years.

The value of the savings on EMI of Rs542 per month, if invested in a recurring deposit, will be approximately Rs6 lakh at the end of the loan tenor.

Indiabulls Housing Finance Limited (IBHFL), the second largest housing finance company in the country, has revised its home loan rate to 9.15 per cent, a reduction of 15 bps points, effective 4 November.

ICICI Bank has also launched a 'Home overdraft facility' for salaried borrowers, which offers dual advantage of a term loan as well as an overdraft facility. While the term loan provides money against property owned by the customer, the overdraft facility gives borrowers the flexibility to access funds instantly for meeting expenses. Those buying the overdraft loan from the bank would be able to utilise the funds for their personal needs. You can avail a minimum 10 per cent of the total amount as term loan and maximum 90 per cent as overdraft.

State-owned Bank of Baroda has also reduced the marginal cost of fund (MCLR) based interest rates by 10 bps across different tenors with effect from 7 November. For five years tenor, the new rate will be 9.45 per cent (9.55 per cent earlier); for three years and one year tenors it will be 9.25 per cent each. Among other tenors, the lending rate for six months will be 9.20 per cent; three month 9.15 per cent, while overnight rate is fixed at 9 per cent.

MCLR is the new benchmark lending rate and replaces the base rate for new borrowers. It is calculated on the marginal cost of borrowing and return on net worth for banks.