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Monday, 23 April 2018

Recent Rate Cuts in Favour of Home Loan Subscribers

A lot happened in the last couple of years, the market went up and down creating a highly unstable situation. However, as people say “all is well if it ends well” the year started on a good note for Home Loan borrowers. There were several amendments in the existing market policies that brought down the interest rate by a profitable percentage entailing immediate and long-term benefits for Home Loan subscribers. Some of the notable rate cuts that are expected to yield benefits for Home Loan new and existing borrowers are listed below.   

The Introduction of MCLR Rate: The MCLR system introduced in 2016 and brought into effect from 1st April 2016; narrowed down the Home Loan interest rates by a considerable margin. The borrowers opting for MCLR rate will be paying a lower interest rate as compared to borrowers subscribed to base-rate, plus they will receive immediate benefit from the interest rate deduction on a Home Loan in the form of lower EMI after every announcement.


Floating Interest Rate: There are two kinds of interest rate offered with Home Loans: fixed interest rate, floating interest rate. Now, both have their own pros and cons but the floating rate Home Loan subscribers pay a lower interest rate. Furthermore, because the floating rate depends on market dynamics and the interest rate is linked directly to bank’s Marginal Cost of Lending Rate (MCLR) or the NBFC’s base rate; after every quarterly base rate announcements by the Reserve Bank of India, the borrower will receive the benefits. 

Repo Rate Deduction: Recently, the repo rate cut by the Reserve Bank of India from 6.25% p.a to 6% p.a is the lowest in nearly seven years. Furthermore, the same is going to translate in lower interest rate on Home Loan.

Reference Read:
Interest Rate Cut – In Favour of Home Loan Borrowers

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