Union Bank cuts rates, offers cheapest home loans in India at 6.40%

[ecis2016.org] The move that is likely to escalate the price war among banks in India that are currently wooing customers with competitive rates to cash in on the festive season 2021.

State-run Union Bank of India on October 26, 2021, announced it has brought down its home loan interest rate to 6.40% from 6.80% after implementing a 40 basis point (bps) cut. This is the lowest home loan interest rate offered by any bank in the country at present.

You are reading: Union Bank cuts rates, offers cheapest home loans in India at 6.40%

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The move that is likely to escalate an ongoing price war among banks in India that are currently wooing customers with competitive rates to cash in on the festive season 2021. Unlike most banks, where the reduction in home loan rates is application only till the festive season ending on December 31, 2021, the rate cut by Union Bank is not limited to the festive period, the bank said in an official statement.

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“Customers will be benefited from this offering during the festive season as we see a rising demand for buying homes. With this reduced rate of interest, Union Bank of India’s Home Loan rate is the most competitive in the industry,” it said.

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The reduction in rates from the Union Bank of India comes into effect from October 27, 2021. However, the new rates at Union Bank will be applicable only on fresh home loans or balance transfer cases.

Nearly all banks in the country have announced reduction in their interest recently to boost the festive spirit by offering cheaper home loan. Aside from cutting interest rates most of these banks have also waived off processing charge on home loan applications to further sweeten the deal for home loan borrowers.

Before the cut by Union Bank, Kotak Mahindra Bank and Bank of India were offering the cheapest home loans, at 6.50% annual interest.  Bank of India announced the cut in its home loan rates only on October 17, 2021.

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Union bank home loan

Union Bank offers home loan to all eligible applicants aged 18 years and above. There is no limit on the loan amount you can apply for at this state-run bank. Union banks offers home loans for the following purposes:

1. Purchase of new/old house/ flat/villa/ apartments, etc.
2. Construction of residential unit on exiting non agriculture plot
3. Purchase of non-agricultural plot and construction of residential unit
4. Repairs/improvements/extension of the existing residential property
5. Take-over of housing loan availed of from another bank
6. Completion of under-construction residential units
7. Purchase of solar power panel along with purchase/construction of house

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Union Banks cuts home loan rates to 6.7%

In a move that may start a price war among home loan providers in India, public lender Union Bank has reduced its home loan rates to 6.7% per annum. With this, the state-run bank has displaced SBI from being the most cost-effect financial institution in the country to offer housing credit.

Union Bank is among the nine public lenders that have reduced their home loan interest rates to up to 7% annually, after banking regulator Reserve Bank of India (RBI), through consecutive cuts, brought the repo rate, at which lends money to scheduled banks in India, to 4%.

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Among the state-run financial institutions, other banks that offer cheap interest rates currently include Bank of India, Central Bank of India, Punjab & Sind Bank, Canara Bank, SBI, Punjab National Bank, Bank of Baroda and Indian Bank. Among private lenders, HDFC Bank and ICICI Bank are the only such entities in the market so far, to change interest below 7% on home loans. SBI, which has traditionally been the bank offering the lowest interest rates, is currently charging 7% interest on housing loans of up to Rs 30 lakhs.

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Cheapest home loans right now

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Borrowers must, however, note that the bank (this happens to be true of all lenders, Union Bank included) would offer its best rate to a customer depending on certain conditions, including your credit score, your credit profile, loan amount applied for and the loan-to-value ratio. Currently, salaried borrowers with a credit score of over 750 will be able to avail of the best interest rates on their home loans.

Also, even though there is no cap on the loan amount you could seek from bank, Union Bank provides only 90% of the total cost as loan, for properties worth up to Rs 30 lakhs; 80% of the total cost for homes worth between Rs 30 lakhs and Rs 75 lakhs, and 75% of the total cost for properties above Rs 75 lakhs. In case the amount will be used for renovation, the banks will issue 80% of total cost of the repairs/renovation as loan.

Borrowers must also keep in mind the fact that these rates are applicable on floating interest rate loans. Charges will be higher, if a borrower decides to go for fixed interest rate loans. The borrower will also have to bear several other small expenses while applying for a home loan, including the processing fee, the legal and technical evaluation charge, etc.

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