Home Loan Rates Sinking Downwards

Buying a property in India is the biggest investment for home buyers and the Reserve Bank of India may have cut policy where the bank or your lending company may reduce the EMI or the loan tenure. Since the last few weeks, two leading banks in India have reduced the interest rates even without waiting for the RBIs initiation and many other banks may reduce their interest rates.

It was expected that the home loan rates would descend if the RBI reduces the key interest rates, which are related to the monetary policies. Nevertheless most of the banks are compelled to lower down their interest rates when the RBI cut its cash reserve ratio (CRR) last month. The change in the CRR results in additional liquidity for the banks will be more rigid in their lending schemes. This has resulted in a major downward trend of the interest rates on home loan schemes from the banks.

Banks cut home loan rates

The bank would consider a cut in interest as RBI may cut the key interest rates. Banks like Central Bank of India and Bank of Maharashtra (BOM) has reduced the interest rates before the RBI announcing its rate cut. According to a source, both public sector lenders have also announced waive in the processing charges. Central Bank of India lowered its rates on home loans of up to Rs 30 lakh (tenure of 25 years) to 10.75%. The Bank of Maharashtra (BOM) decided to give housing loans under Rs 25 lakh for a five-year tenure at the reduced base rate of 10.60%. It is believed by the analysts that the interest rates will cut down to a medium term.

It is predicted that the RBI will soften its monetary policy, so that not only new customers but also the existing customers can experience lower interest rates. Financial experts say that due to high interest rate, there is a fall in credit growth and to improve this condition, there will be reduction in the interest rates in future.

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Guideline for property buyers

The Home loan rates in India is at its peak and it is very unlikely that there would be any interest rate hikes in the near future. For buying apartments in India or investing in real estate sector, this would be the right time. Banks are reducing interest rates to attract new customers. Following are a few guidelines for you to plan your home loan and property buying.

• If you are planning for Home loan in a five or ten year tenure, it is advisable to get your home loan in floating rates.
• It makes no sense if you are taking a home loan just because interest rates have fallen.
• This fluctuation in the interest rates will have the least effect on your loan amount, if your home loan is for more than 10 years.
• This is the right time to invest as rate cut down will directly or indirectly lead to increase in the demand of property for Sale in India. Rising demand for property buying may result in increase in the prices of the properties by the builders.
• The important thing which you need to remember is that bank reducing interest rates do not ensure your application for home loan which will be approved. It is important that you monitor your credit scores and purchase your credit report from CIBIL before applying for Home loan.
• If you have cleared your loans or overdue accounts, get acknowledgement from the bank and inform CIBIL with proof  for your claim.
• If you are an existing customer of the bank, you can opt for shifting the loan to another bank that offers a lower interest rate than existing one.