Will home loan interest rates fall further?

[ecis2016.org] Interest rate on home loans have hit a record low and chances of any further downward correction are quite slim

Through consistent reductions, most Indian banks have brought home loan interest rates to the sub-7% level. The move, which is primarily aimed at boosting consumption in the country’s second-largest employment-generating sector, at a time when the economy has been severely hit by the Coronavirus pandemic, may prompt many buyers to materialise their dream of property ownership, in spite of an overall economic depression.

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After the RBI reduced the repo rate, at which it lends money to the banks, to 4%, almost all banks have lowered the interest rate on their floating rate home loans. With this, interest rates on home loans currently stand at a record 15-year low level.

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Cheapest home loans by Indian banks

Data as on November 30, 2020

[ecis2016.org] Are you eligible for the reduced home loan interest rates?

However, should a borrower stay put and wait for the banks to cut interest rates further? Should one not consider the possibility of the RBI further reducing the repo rate, which could again trigger a rate-cutting spree among banks? Sector experts do not think so.

Will the RBI increase or cut the repo rate?

The RBI, on December 4, 2020, decided to maintain a status-quo on the repo rate, at 4%, amid stubbornly high inflation. A spike in consumer prices forced the six-member RBI monetary panel to hit the pause button on reductions after cutting rates by 115 basis points in 2020.

Will banks reduce home loan interest rates further?

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According to Dinesh Kumar Khara, chairman of the country’s largest lender, State Bank of India (SBI), lending rates have actually bottomed-out and will remain at these levels for a while, till the economy recovers.

Khara indicated that financial institutions in India are aware that the Coronavirus-hit economy requires softer rates to continue. “We are very mindful of supporting growth presently,” he told the media.

Rates could, however, start showing an upward movement, as soon as economic activity picks up and some semblance of normalcy is restored. Keeping in view all these factors, this might be the best time for property investments with the help of housing loans that will also enable buyers to get tax benefits.

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