Home Loan EMIs are set to Fall, Read How Will This impact You
Updated on January 17, 20152 mins read
Here’s some great news for all home loan borrowers
Following The Reserve Bank of India’s decision to reduce repo rate by 25 bps to 7.75% from 8%, all leading banks are expected to pass on this benefit to their customers by reducing the lending rates. Bankers and market experts expect a substantial fall in lending rates this year with an estimate ranging from 50 bps to 125 bps. This means that in 2015 you can expect home loan interest rates to fall by 0.50% to 1.25%! This is huge.
State Bank of India (SBI) Chairman Arundhati Bhattacharya said, “This cut might be just the beginning of a rate easing cycle.” HDFC Bank and Standard Chartered said that they expected at least two more rate cuts, totaling 50 bps, this year. Others, such as Morgan Stanley put the figure at 125 bps.
This means that in the next few months, new borrowers can expect home loan interest rates to reduce by 0.25% to 0.50%. As a ripple effect the Union Bank of India has reduced its lending rates to 10% from 10.25%, other banks are expected to follow soon. So if you are planning to take a new home loan, it is advisable to wait until the February budget rolls out, as further rate cuts are expected soon after its announcement.
However existing borrowers shouldn’t expect an immediate drop in their EMIs as lending institutions prefer offering low rates to lure new borrowers, while their existing customers continue to pay high interest. To check this situation several borrowers choose to transfer their home loan to other banks or within their own bank, to avail low interest rates. You can do so by paying a fee, which varies from bank to bank.
This rate cut spells good news for all borrowers and has taken everyone by surprise.
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