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Home Articles Repo Rate Cut: Home Loan Rates to Fall?

Repo Rate Cut: Home Loan Rates to Fall?

IndianMoney.com Research Team | Updated On Thursday, August 08,2019, 03:34 PM

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Repo Rate Cut: Home Loan Rates to Fall?

 

 

The RBI has cut the repo rate by 35 basis points. The repo rate has been reduced from 5.75% to 5.4%. This is good news for home loan and car loan borrowers. Your home loan EMIs and car loan EMIs would soon go down.

SBI has cut home loan rates, soon after the policy announcement. What does this mean? Your SBI home loan interest rate falls. SBI, India’s largest bank, has cut MCLR by 15 bps across tenors. The revised interest rates are applicable from 10th August 2019.

SBI offers home loans linked to MCLR rates. The SBI one-year MCLR has reduced from 8.4% a year to 8.25% a year.

Why SBI Home Loan Interest Rate Falls?

The public sector lender SBI had offered a new home loan product from July 1st. This is a repo rate linked-home loan product. SBI home loan interest rate gets automatically revised, when there is a change in repo rate.

If you have availed SBI home loan, the SBI home loan interest rate falls as RBI has cut repo rate by 35 bps.

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Repo Rate Cut: Home Loan Rates to Fall?

Will Banks Cut Home Loan Rates?

While banks are quick to raise home loan rates after RBI repo rate hike, few banks cut home loan rates after a repo rate cut. Banks offer lower home loan rates to new borrowers, while existing borrowers are not offered lower home loan rates. Existing borrowers are forced to negotiate or opt for home loan balance transfer.

Rate Cut Makes Home Loans Cheap

The RBI has cut repo rate by 35 bps to 5.4%. Assuming banks pass on the lower home loan rates; let’s calculate your home loan EMIs.

Home Loan Amount (Rs)

50,00,000

Tenure (Years)

20

Current Interest Rate

8.50%

Current EMI (Rs)

43,391

New Interest Rate

8.15%

New EMI (Rs)

42,290

Cut in EMI (Rs)

1101

Let’s say you had availed a home loan of Rs 50 Lakhs with tenure of 20 years and interest rate of 8.5%. Your current home loan EMIs are Rs 43,391. Use IndianMoney home loan EMI calculator to calculate home loan EMIs.

The new home loan interest rate is 8.15%. Your new home loan EMIs are Rs 42,290. There is a cut of Rs 1,101 on home loan EMIs.

Existing Home Loan Borrowers:

  • Home Loans Linked to MCLR

Existing borrowers enjoy lower home loan EMIs, only if bank lowers MCLR. The lower MCLR translates to lower EMIs only on home loan reset date.

Now, banks offer a home loan with reset date of 6 months to a year. On this reset date, banks calculate home loan interest rate which is Banks MCLR + spread; on this date. You can also reduce home loan rates by prepaying home loan. HDFC has reduced lending rates by 10 bps on existing loans.

New Borrowers

If you are a new home loan borrower, you have the option of availing home loan linked to MCLR or repo rate. Check terms and conditions before availing home loan. SBI offers repo rate linked-home loan to borrowers. HDFC Bank has cut MCLR by 10 bps across tenors. HDFC Banks one-year MCLR is 8.6%.

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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