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Home Loans Get Really Cheap: How to Get It this October? Research Team | Posted On Saturday, October 05,2019, 12:12 PM

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Home Loans Get Really Cheap: How to Get It this October?



There is good news if you want a home loan to buy that dream house. RBI has cut the repo rate by 25 bps to just 5.15%. This is the lowest since the year 2010. This is the fifth time RBI has cut the repo rate this year. RBI has cut the repo rate by 135 bps from February 2019.

The repo rate cut will reduce home loan EMIs of borrowers taking new home loans. Yes, your home loan will be really cheap. You have external benchmarking of floating rate loans from October 1st. If you are planning to take home loans this festive season of October, Cheers. Home Loans get really cheap.

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See Also: Compare Home Loan Rates Across Banks

Home Loans Get Really Cheap: How to Get It this October?

Existing Borrowers: MCLR home loan

The marginal cost of funds based lending rate or MCLR for all loans including home loans, came into effect on April 1st 2016. MCLR is calculated based on tenor premium, negative carry in maintaining CRR with the RBI, marginal cost of funds and the banks operating costs. Different banks have different MCLR. In simple terms, MCLR is the lowest rate below which banks cannot lend.

Reset clause is very important in MCLR home loan. The home loan interest rate reset clause allows the bank to review and reset interest rate after a certain period. (Usually 6 months or 1 year).

After external benchmarking the RBI circular says that interest rate must be linked to an external benchmark and must be reset once in three months. The external benchmark could be the Government of India three-month Treasury bill yield published by the Financial Benchmarks India Private Ltd. (FBIL) or repo rate.

How does this work? Let’s say you have availed a home loan on September 15th with a 3 month reset-period. Now, in the October monetary policy review, RBI has cut the repo rate by 25 bps. You do not get the immediate benefit of the repo rate cut as the loan gets revised only on the reset date in December. But, if the RBI cuts the repo rate again in December, you could get the benefit of 2 rate cuts.

Repo- Linked Home Loan

SBI the largest lender in India and many other banks have launched the repo-linked home loan. These are home loans linked to the RBI repo rate. SBI was the first bank to introduce the repo-linked home loan in India. SBI withdrew the scheme on September 16th and reintroduced it with certain changes in interest rates and the product.

SBI repo-linked home loan:

SBI repo-linked home loan is based on the bank’s repo rate linked lending rate or RLLR. The SBI repo-linked home loan is fixed at 225 bps above the repo rate of 5.4%. This works out to be 7.65%. (This is repo rate of 5.4% + 225 bps). SBI charges a spread of 40 bps for home loans between Rs 30 Lakhs and Rs 75 Lakhs. This means an effective rate of 8.45%. For home loans above Rs 75 Lakhs, SBI has a premium of 50 bps. The effective SBI home loan rate works out to be 8.55%. SBI charges home loan interest rate of 8.2% for home loans up to Rs 30 Lakhs.

SBI Home Loan Interest Rates:

Loan amount

Interest Rate

Loans up to Rs 30 Lakhs


Rs 30 Lakhs to Rs 75 Lakhs


Above Rs 75 Lakhs


See Also: From Today, SBI Home Loans Get Cheaper

For SBI repo-linked product, the bank’s repo rate linked lending rate or RLLR changes from the first day of the following month after RBI repo rate revision. RBI cut the repo rate by 35 bps from 5.75% to 5.4% on 7th August 2019 and SBI changed RLLR accordingly. RBI has now cut the repo rate from 5.4% to 5.15% in the October policy review meet. The SBI repo-linked home loan rates would fall in November. Could we see home loan rates below 8%? Wait and watch as your home loan gets cheap.

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