In the last one year, interest rates of home loans have cut down with falling property price. Interest rate for home loan less than Rs 30 lakhs have fallen from 12 per cent to 8 and 9 per cent. This has led to a fall in the EMI by 24 per cent on a 20 year loan.
With onset of the festival season, banks like State Bank of India (SBI) and Punjab National Bank (PNB) have not only cut interest rates but have also waived the processing fees. Other lending institutions like HDFC Ltd and ICICI Bank are also giving loan at a competitive rate. In a scheme launched by SBI, the interest rate for the first year is charged at 8 per cent and for the next two years at 8.5 per cent. In fact, the aggressive posture of SBI has forced other banks to follow suit.
After the SBI’s announcement, PNB cut its home loan rate to 8.5% for the first three years and then will link it with the then prevailing market condition. HDFC Ltd is also giving loan between Rs 30 lakh and Rs 50 lakh at 9 per cent for the entire duration of the loan repayment period. If the present condition remains the same and the bank does not change the prime lending rate, the new rate will be 9 per cent as against 10.25 per cent earlier.
High-end customers will also find an advantage in SBI Advantage Home Loan for loans above Rs 50 lakh. The SBI loan will come with a fixed rate of 8% per annum (unchanged) for the first year, and 9% for second and third year — down from 9.5% earlier. With lower repayment obligations during the initial fixed rate periods of 3 years, the customer can buy a new house without compromising on the lifestyle of the family. Even if the interest rates go up marginally by half percentage after three years, income level of borrower will also increase and it will not affect his repayment capacity much.