Recently RBI cut repo rate from 6.5% to 6.25% cutting the rate effectively by 25 basis points. According to industry experts, this rate cut might get passed on to the customers by banks, which will translate into lower monthly installments for a car loan, personal loan or home loan.
Interest rates of home loans are currently dependent on the MCLR rate(Marginal Cost of Funds based Lending Rates) which is an internal benchmark of the bank, and hence, the effective rate of interest on the loan varies according to banking benchmark rates. RBI has directed the banks to link the loans to an external benchmark but very few banks have done it.
As a borrower, remember that when RBI brings about a change in the repo rate, if the loan is linked to MCLR, there may not be any immediate impact on your EMI in the same or next month. The EMI will be reset after 6 or 12 months as per the contract. However, if the loan is linked to the repo rate, the transmission may be quicker. In times of rising interest rates, such loans linked to repo rate may hurt while in a falling interest rate scenario, borrowers seem to stand at an advantage.
A fall in repo rate impacts both the existing and future borrowers. Public sector banks, including with the State Bank of India (SBI), are generally the first ones to reduce their rates and pass on the benefit to consumers.
If you are planning to take a home loan, find out your best options among public and private sector banks.
Call our RR Office to find out the best interest rates.
Please click the link below to find out how different banks fare in the interest rates.
RR Housing is a leading construction and real estate company in Coimbatore providing quality design and construction with fully vaastu complaint gated community flats and row houses for the last 30 years. Delivered over 20 lakhs square feet of construct area to more then 1000 happy families.