Know How to Get More Benefits from Revised Home Loan Interest Rates

As per the fresh rules mandated by the Reserve Bank of India, all financial institutions in India must now link their new home loan prices to a new external benchmark, namely the MCLR. This new regulation was implemented at the tail end of RBI’s 5th consecutive repo rate cut for FY2019. With these fundamental shifts in lending, home loan interest rate is expected to become much cheaper for borrowers in the near future. 

 

 

● 8.8% - Total year-on-year increase in the value of secured lending in India as of October 2019.

● Rs. 25,000 Crore - Average per month home loan disbursals by the largest housing finance companies in India in 2018. 

● 3.5% - Quarter to quarter growth as of the 3rd quarter of 2019.

 

Previously, in the absence of external benchmark linking, financial institutions were quick to match RBI rate hikes with their lending rates. On the other hand, when it came to passing down reductions in lending rates, financers deliberated before catching up. But with the newly mandated rule for external benchmark linking, financial dealings in the home loan sector is expected to promote transparency, especially for borrowers. They will now be able to avail interest rate cuts on their advances much faster and consequently benefit from lower EMI payments.

 

 

Between the months of February and August 2019, there was a reduction in RBI’s repo-rate by 110 basis points cumulatively. But during the same period, financial institutions reduced their lending rates by a mere 29 basis points, which held back borrowers from maximising benefits on their housing loan interest rates. 

 

But with the newly imposed regulations, borrowers will be more directly able to benefit from the RBI’s latest repo rate cut (25bps) on their interest rates. Most of the country’s premier institutions have already adopted this rate cut and the consequent changes to MCLR (a reduction by 10 bps) into their lending rates. For instance, some lenders have already reduced their spread over the MCLR and lowered their interest rates by as much as 0.10%.

 

To maximise your benefits from this newly introduced system for home loan rates, it is crucial for borrowers to check if lenders have reduced their spread on the current MCLR. Existing borrowers should make sure that they are under the floating interest rate regime, and their respective financial institution has lowered their lending rates, post reset clause. 

 

If lenders have not reduced their rates, you can choose a home loan balance transfer, offered by select lenders to shift your existing advance to a lender under this new regime.

 

It is also crucial for borrowers to calculate their repayment amount by using a loan EMI calculator. Such calculators help compute the loan amount, tenor and EMI combinations as per the rate of interest applicable. Planning the financial requirements as per the EMI is vital ensure zero missed payments and defaults.

 

 

 

Knowing about MCLR based home loan interest rates, however, should not be the only parameter based on which one should avail home loans. To maximise your benefits from the advance, you should also look through other features offered by a financial institution, viz. –

 

● High value loans of up to Rs. 3.5 Crore.

● Flexible tenors ranging up to 240 months for convenient repayment.

● Instant approval and easy disbursal facilities.

● Minimal eligibility criteria and documentation requirements.

 

With these benefits and competitive interest rates, now is the perfect time to avail housing loans to enjoy maximum benefits for it. Nonetheless, it is crucial to check the terms and conditions to enjoy the most beneficial and convenient repayment. Refer to leading lenders for such a long-term financial commitment.