Are you eligible for the reduced home loan interest rates?


From public to private lenders, most banks have reduced their home loan interest rates to sub-7% annual interest. We look at who can avail of these reduced rates

To boost demand in the real estate and construction sector, which employs the largest number of people in India after agriculture, the Reserve Bank of India (RBI) has reduced its lending rate to 4% through several reductions in the past, in the backdrop of the Coronavirus pandemic. With RBI’s repo rate, at which it lends to scheduled commercial banks in India, down to 4%, financial institutions have started to lower home loan interest rates to sub-7%.

In fact, most leading public and private lenders in the country are currently offering home loans in the range of 6.8% to 6.9%.

 

Lowest home loan interest rates in India

LenderInterest rate in percentage
Union Bank6.70
Bank of India6.85
Central Bank of India6.85
Punjab and Sind Bank6.90
Canara Bank6.90
SBI6.90
PNB6.80
HDFC Bank6.90
ICICI Bank6.90
Bank of Baroda7.00
Bank of India6.85

Data as on October 31, 2020

Note: These are the lowest rates offered by the said bank, which are offered to borrowers based on their credit score and gender, apart from other factors. Most banks demand a credit score of over 700 to offer the best rates.

 

However, as a prerequisite to get the full benefit, banks expect borrowers to meet certain conditions. Almost all banks are offering the lowest rates to borrowers with a good credit score. Someone with a comparatively lower CIBIL score would be charged a higher interest rate on their home loans.

Private lender Kotak Mahindra Bank, which reduced its home loan interest rates to 6.90% on October 22, 2020, for example, would be offering the concession to only those borrowers who have a CIBIL score of 750 and above.

A similar condition was put across by India’s largest lender SBI, when it reduced its home loan interest rates a day earlier, bringing it to 6.90%. The bank, however, did not specify the credit score it expects from a borrower, to avail of the concession on new home loans.

 

What is a good credit score?

Note here that credit score is assigned to borrowers by credit bureaus in India, based on their financial history. Apart from the credit history, factors that also influence your credit rating include the types of credit, length of credit history, credit utilisation and credit inquiries. The score ranges between 300 and 900. A credit score of above 700 is considered good by financial institutions.

 

Credit sore

 

At this juncture it is also pertinent to mention that people who are already servicing a home loan will have to approach the bank to avail of the benefits of the lower rates. Unless your home loan is already linked to the bank’s repo-linked lending rate (RLLR), any benefits offered by the lender would not reflect against your home loan liabilities. Borrowers, whose loans are linked with the previous MCLR or base rate regime, will have to get in touch with their home branch to make the switch. They will be asked to pay a processing fee for this.

 

Why is credit score important for home loans?

With the COVID-19 pandemic battering economies across the globe, all leading economies globally have slipped into a recession, India included. Amid rising concerns about job security, loans defaults are also likely to increase. In such an atmosphere, lenders are showing extra caution while disbursing home loans. In order to lower default risks, they are willing to offer loans only to those candidates who have a good credit report to show.

 

How to maintain a good credit score?

The rule of thumb, is to never miss the payment deadlines on EMIs and loan repayments or credit card bills. Instances of cheque bounces also are included in your credit report analysis. Also, never utilise the maximum limit on your credit cards.

Benign as it may seem, making several inquiries about financial products and loans, is also viewed adversely by credit bureaus. Refrain from making frivolous inquiries.

Anyone defaulting on their loans with you as its guarantor will also find a mention in your credit report.

See also: Nine assumptions that will harm a home buyer’s credit score

 

FAQs

What is the interest rate on SBI home loan right now?

SBI is currently offering home loans at 6.90%.

What is the interest rate on PNB home loan right now?

PNB is currently offering home loans at 6.80%.

What is the interest rate on HDFC home loan right now?

HDFC is currently offering home loans at 6.90%.

I have a credit score of over 800. How will it benefit me when getting a home loan?

Lenders mostly offer lower rates of interest to borrowers with a credit score of 700 and over.

 

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