Mortgage rate: These banks offer mortgage loans below 7% interest rate

Mortgage borrowers have enjoyed low multi-year interest rates for some time. However, things could change soon, as India’s largest lender, the State Bank of India (SBI), raised its policy rate by 10 basis points (bps) last week. The revised SBI base rate is 7.55% as of December 15, 2021. The base rate is the lowest interest rate at which a bank can lend to its customers.

Read also: SBI key rate hike: is this the beginning of the end of the low rate regime?

So, if you are someone looking to buy a home using a home loan, maybe now is the right time. In fact, there are many banks that offer loans at an interest rate of less than 7%.

For example, Union Bank of India Repo Rate Linked Home Loan starts from a minimum of 6.4%. The SBI term loan starts at 6.65% and the HDFC Bank mortgage starts at 6.95%. Bank of Maharashtra’s offers an interest rate on home loans starting at 6.40%. These are the rates for home loans for salaried borrowers. Here are some of the banks offering lower interest rates:

To read also: Here are the interest rates of real estate loans linked to the repo rate

What is a mortgage indexed to a pension rate?

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 most mortgage loans from banks. These mortgage interest rates will move at the same pace as the external benchmark to which they are linked, such as the repo rate.

The RBI has asked banks to link their interest rates on retail loans to one of the following external benchmarks:

  • RBI pension rate
  • Yield on 3-Month Government of India T-Bills as published by Financial Benchmarks India Pvt. Ltd. (FBIL)
  • Yield on 6-Month Government of India T-Bills as published by FBIL
  • Any other benchmark market interest rate published by the FBIL

Following its bimonthly 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 Loan Rate, or RLLR, is a lending rate that is linked to the Reserve Bank of India repo rate.

How will your EMI perform under the new external referral lending rate regime?

To categorize 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. In accordance with the RBI circular, if your credit score undergoes substantial changes, the bank may revise the risk premium charged on the home loan.

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