By Sanjeev Sinha
The Covid-19 pandemic has dealt a heavy blow to the Indian economy, as a result of which the Reserve Bank of India has been forced to reduce the repo rate to boost lending and demand. This has led banks to lower the interest rates for repo-linked home loans while some housing finance companies have also reduced the rates of their prime lending rate loans to offer competitive alternatives.
In fact, while many banks offered MCLR-linked home loans starting at 8.8% p.a. in February 2019, currently there are as many as 13 banks and 4 Housing Finance Companies that are offering home loans starting at under 7% p.a. This makes it an opportune moment for those looking to buy a house or make adequate part prepayments to cut down their loan burden. However, before finalizing your decision, check your credit score to see its above 750-800 to get the best possible rates and also ensure you have the necessary margin money and a stable income to be able to repay your loan in time, according to BankBazaar.
Do note that only banks offer floating rate home loans linked to an external benchmark like the repo rate while the loans offered by the housing finance companies are benchmarked to their prime lending rate. If you’re considering taking the loan from a bank, ensure your credit score remains high throughout the tenure of the loan as any considerable dip could hike the risk margin and result in higher EMIs. Also understand that the repo linked loan EMIs will see an immediate and proportionate jump whenever the central bank decides to hike the key policy rate. As such, you may also want to make as much part prepayments as possible when the rates are low to become debt free faster.
You may also want to apply for a home loan from an HFC if your loan quantum requirement is high. HFCs, which specialize in different home loan products, are also known to have relatively relaxed norms when it comes to the borrower’s credit score and often involve hassle-free paperwork. And although their interest rates are usually higher than those offered by banks, currently the difference between the lowest home loan interest rate offered by a bank and an HFC has shrunk to just 15 basis points, as per BankBazaar.
So, if you’re looking for a floating rate home loan, here are the interest rates currently being offered by banks and HFCs in the country. Compare your options and go for the one that best meets your requirements. Do note the interest rate applicable to you will be determined based on your age, gender, income, credit score, loan size, property size or any other terms and conditions laid out by your lender. ( FE )
Interest Rates of Floating Rate Home Loans by Banks and HFCs
