Read also: SBI rate hike: is this the beginning of the end of the low rate regime?
So, if you’re someone looking to buy a home using a home loan, now might be a good time. In fact, many banks offer loans at an interest rate of less than 7%.
For example, the Union Bank of India‘s repo rate linked home loan starts from a low of 6.4%. The SBI term loan starts at 6.65% and the HDFC Bank home loan starts at 6.95%. Bank of Maharashtra’s offers an interest rate on home loans that starts from 6.40%. These are the home loan rates for salaried borrowers. Here are some of the banks offering lower interest rates:
Read also: Here are the interest rates for real estate loans linked to the repo rate
What is a repo indexed mortgage?
Since October 1, 2019, the RBI has mandated banks to link mortgage interest rates to an external benchmark. The repo rate has been used as a benchmark for home loans from most banks. These interest rates on home loans will move in parallel with the external benchmark to which they are linked, such as the repo rate.
RBI has asked banks to link their retail lending interest rates to one of the following external benchmarks:
- RBI Repo Rate
- Indian government 3-month treasury bill yield published by Financial Benchmarks India Pvt. ltd. (FBIL)
- Indian government 6-month treasury bill yield published by FBIL
- Any other reference market interest rate published by the FBIL
Following its bi-monthly monetary policy review meeting on December 8, 2021, the RBI announced its decision to keep rates unchanged. The repo and reverse repo rates are currently 4% and 3.35%, respectively.
The repo-linked lending rate, or RLLR, is a lending rate that is tied to the Reserve Bank of India’s repo rate.
How will your EMI change under the new benchmark external indexed lending rate regime?
To classify the borrower based on credit risk, some banks have internal risk assessment teams while others rely on credit scores to assess the risk of each borrower. According to the RBI circular, if your credit score undergoes substantial changes, the bank may revise the risk premium charged on the home loan.