RBI slashed its benchmark repo rate by 50 basis points (0.5 percent) to 6.75 percent. This came after a total of 75 basis point cut earlier this year in three tranches as inflation pressures eased in the economy.
Check out RBI’s trend
Questions which arise for the existing customer…
Will this reduction be passed to existing home loan customers ?
Already, the country’s largest state run lender, State Bank of India , has cut its base rate by 40 basis points, or 0.4 percent, to 9.3 percent, effective October 5, Chairperson Arundhati Bhattacharya told CNBCTV18.
In an interview, Bhattacharya said that there could be further rate cuts in the future by banks, given that the RBI Governor Raghuram Rajan has indicated that the door for future rate cuts is open.
SBI also has cut its deposit rates by 25 basis points across maturities, effective next Monday, the bank chief said, adding that it would help bring down cost of funds for the lender.
If banks/lending institutions doesn’t pass on this benefit to existing customer, is there a way to avail it. If so how ?
Yes, existing loan lenders can avail the benefit in following ways
- The old home loaners have the choice to convert their existing rates to current rates by paying hefty penalty charge of minimum of 0.56% on left over principle to the banks/lending institution. Its advised to compare the benefits of paying part-payment over penalty. Check out LOANYANTRA.com part-payment calculator.
- The old home loaners have one more choice of switching to new bank or lending institution. Check out LOANYANTRA.com Switch & Save option and get rewards and benefits from LOANYANTRA.com
How much does it save tenure ?
Definitely, there will be a change in the tenure when you go for a lesser interest rate. Infact, 0.5% change in interest rate will result in closing your loan to a maximum of 30 months earlier.
For example, if you have a loan of 50 lakhs for a tenure of 20 years with 10% interest, a change to 9.50% interest will change your tenure to 18 years and 2 months.
How much does it save my EMI ?
If you want to keep your tenure same, your EMI reduces from Rs. 48,251 to Rs. 46,606. This leaves you with a saving of Rs. 1645.
Competition in home loan space has been quite intense not only from banks, private banks, nationalised banks but also from the NBFC space. SBI has again proved that it stands on the top among its rivals. Infact, with the immediate reduction in the interest rate and implementation, it makes way to the competition.
Reduction in the interest rate is always advantageous.
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