A big relief news has come for home loan borrowers. LIC Housing Finance has announced a significant cut in its home loan interest rates. The company has reduced the interest rates directly by 0.50%, after which now their home loan will start from just 7.50%. This is a great opportunity for all those who want to fulfill their home dream or are thinking of refinancing their existing loan.
This cut is a direct result of the reduction in the repo rate by the Reserve Bank of India. After the reduction in the repo rate by the central bank, many financial institutions and banks have made home loan interest rates cheaper to benefit their customers. Currently, the repo rate is stable at 5.50%, which gives banks an opportunity to provide better interest rates to consumers.
Home Loan Interest Rates in Government Banks
Government banks have always been known for their reliable and competitive rates. After the reduction in the repo rate, these banks have also made their home loans more affordable. Let’s take a look at the interest rates that the major public sector banks are currently offering on home loans:
State Bank of India Starting from 7.50%
Punjab National Bank Starting from 7.50%
Bank of Baroda Starting from 7.50%
Union Bank of India Starting from 7.35%
Bank of India Starting from 7.85%
This table will help you compare the interest rates offered by various public sector banks so that you can choose the most suitable option for yourself. Union Bank of India emerges here with the lowest starting interest rate, making it an attractive option for potential borrowers.
The direct impact of the reduction in interest rates on your loan and EMI
You must be wondering how much this 0.50% reduction in interest rates will affect your pocket. This will have a direct and positive impact on your total payment and monthly EMI.
Savings on a loan of Rs 20 lakh
Suppose you have taken a home loan of Rs 20 lakh for a period of 20 years.
New interest rate (7.50%)
At this rate, you will have to pay a total interest of Rs 18.66 lakh. This means that you will have to pay a total of Rs 38.66 lakh including principal and interest.
Old interest rate (8%)
Earlier, at the rate of 8%, you had to pay a total of Rs 40.14 lakh on the same loan amount. Total savings: This reduction will save you a tremendous amount of Rs 1.48 lakh in your total loan payment. This is a significant amount that you can invest in other investments or use to fulfill your dreams.
There will be bumper savings on a loan of Rs 30 lakh
If you have taken a loan of a slightly higher amount, the savings will be even more spectacular.
Suppose you have taken a home loan of Rs 30 lakh for a tenure of 20 years.
New interest rate (7.50%)
At this rate, you will have to pay a total of Rs 28 lakh as interest, and a total of Rs 58 lakh as principal + interest.
Old interest rate (8%)
Earlier, at the rate of 8%, you would have to pay a total of Rs 60.22 lakh as interest and Rs 30 lakh as principal. Total savings: In this case, you will have an incredible savings of Rs 2.22 lakh over the entire tenure of the loan! This saving will make you financially strong and can make a huge difference to you.
Floating-rate loan borrowers will get direct benefits
Customers who take home loans on a floating rate will get direct and immediate benefit from this reduction in interest rates. This is because whenever the Reserve Bank reduces the repo rate, banks have to reset the interest rates accordingly for those who take loans on a floating rate. This simply means that for those whose EMI is already running, their monthly installments will automatically be reduced.
This is a golden opportunity for those who have taken a loan on MCLR (Marginal Cost of Funds-Based Lending Rate) or fixed rate. If you want, you can switch your existing loan from MCLR or fixed rate to a floating rate i.e. RLLR (Repo Linked Lending Rate). Banks usually charge some nominal fee for this switch. This will be especially beneficial for customers whose loans are in the initial stages, as they will benefit from greater savings in the long term. Contact your bank and consider options to switch your loan so that you too can benefit from this attractive interest rate cut.