Home loan interest rates at a new low; is this the best time to buy a house and take advantage of the lowest interest rates?

If you were thinking of buying a new house, but the pandemic put a stall on your plans, and then the high rate of inflation and many banks going bust put squalor to your dreams, well, the tide sure seems to have changed presenting a short window of opportunity – this is the time when you can take advantage of the reduced interest on home loan rates.

Both State Bank of India and Kotak Mahindra Bank have reduced interest on home loan rates.

This would be an excellent time to take advantage of India’s top lenders; in addition to the all-time – low – interest rates, they have introduced a couple of offers that include discounts on processing fees and also special benefits for women buyers.

6 factors that will influence your home loan interest rates

Why should you take advantage of this?

The slashing of Home loan rates hasn’t happened in a while yet. And this also comes as a relief to many who were in the planning mode for buying a house but had to alter or stop their search due to the uncertainty presented due to the pandemic. 

Both the banks have competitively reduced their home loan rates, which would be an excellent time to take advantage of the same.

Let’s look at some of the home loan interest rates offered by the various banks:

State Bank of India: SBI now offers an interest concession of up to 70 basis points with interest rates starting from 6.70% onwards. However, this is a limited offer until 31 March, along with this, SBI is also giving a 100% waiver on processing fees.

The interest concession is based on both the loan amount and the CIBIL score of the borrower.

The customers can apply from the safety and ease of their homes and can get an additional interest concession of 5bps if applied via the YONO app.

In addition to this, SBI has also taken into account woman loan applicants and, on the eve of International Women’s day, has offered a special 5 bps concession to women borrowers.

What is the highlight of the SBI offer?

For up to Rs. 75 Lakhs –at—6.7% ( for salaried women borrowers and is the cheapest rate ever      offered by SBI)

Cheapest Home Loan - Home Loan Interest Rate | mymoneykarma

Kotak Mahindra Bank – 

After SBI announced its slash on home loans, Kotak Mahindra Bank followed suit and announced 10 basis points cut in its home loan rates, albeit for a limited period only.

With this slash in interest rate, Kotak Mahindra Bank claims to be the lowest in the market yet; customers will be able to avail of home loans for 6.65% till 31 March.

The rate of 6.65% is applicable to both home loans and balance transfer loans across amounts.

In addition to this, the lender is also giving a 100% waiver on processing fees. 

What is the highlight of Kotak Mahindra Bank’s offer?

It is offering the cheapest home loan rate in the market at 6.65%

Comparative analysis of Home loan Rates

Banks                                                                       Rate of Interest

Kotak Mahindra Bank                                                      6.65%

State Bank of India                                                         6.70%

Axis Bank                                                                       6.75%

Citi Bank                                                                        6.75%

PNB (Punjab National Bank)                                             6.80%

ICICI Bank                                                                      6.80%

HDFC Bank                                                                      6.80%

Net Interest Rate Spread - Overview, Example, Importance

Is this a short-term push to boost demand for home loans?

This is not the first time that banks have reduced home loan rates; they have done so in the past to boost sales and competitive advantage.

However, the reason might be a little more complex this time around; many suggest that one of the reasons for this reduction is that work from home has become a norm now, which has prompted many people to go out and look to buy larger spaces. 

The fact the majority of people are working from home and the kids are studying from home has encouraged people to look for a better lifestyle.

Another reason is that the numerous fence-sitters who were waiting until now are on the move and are jumping to buy residential, affordable housing to use and not for investment ( this is a considerable change, since many thought of purchasing a second home as an investment)

And so since the pandemic struck, a large majority is now looking to combine their needs and the thought of investment (secondary home) as one major decision. 

High Interest Rates Deter Buyers From Taking Housing Loans

Why have banks reduced their home loan rates at all?

It is to be noted that in the current market, the home loan rates were already at an all-time low, but as Nilesh Shah, M.D Kotak Mahindra Asset Management Co. explains, the banks have taken a call since home loan buyers are far better both in terms of credit and risk-adjusted return.

Also, this move (lowering of home loan interest rates) is supported as there have been changes in the capital liquidity side of the bank, and hence there is competition amongst banks to provide competitive home loan rates to buyers.

Compared to all offerings by a bank, a home loan enjoys the best in terms of credibility. 

Hence the question – is this the best time to buy a house? And does this apply to only new home buyers or existing home buyers too?

The existing home buyers will have a choice to go back to their existing banks and look into the terms and conditions on which they (Home loan buyers) have borrowed.

The housing loans have been reducing since the last few months, and this is the most competitive that home loan rates have ever been, and hence they are chances that the home loan interest rates will bottom out here, and their movement will be subject to ho government securities yield moves. 

Hence according to experts, this 40 bps spread is not likely to narrow further – therefore, yes, this would be the right time to avail of the offer. 

As far as the real estate inventory goes – there are a lot of unsold and unfinished projects which will now be offered at competitive prices; also, there is no GST on a readymade property, even at the time of execution of the sales deed, a lot of state governments have cut the stamp duty, etc. and this is also an advantage for a real estate buyer.

In conclusion, keeping all of the above points in mind, one can safely say that this indeed would be an excellent time to buy a house. 


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