Home loan rates are unlikely to go down any further as RBI keeps rates unchanged

Home loan rates are unlikely to go down any further as RBI keeps rates unchanged
  • The unchanged repo rate at 4% by RBI in August’s bi-monthly monetary policy statement augurs well for home loan borrowers as retail home loans rates are directly linked to benchmark repo rates.
  • Currently, most home loan rates by banks, NBFCs are below 7%.
  • Rates even go below 3% for borrowers who avail government subsidies like credit linked subsidy scheme (CLSS).
Home loan rates will not be going down further as the Reserve Bank of India (RBI) has maintained the status quo on policy rates once more.

Repo rate remains at 4% and reverse repo rate at 3.35%. This is the eighth time that the RBI has kept the repo rate unchanged.

Further, officials at home loan companies believe that home loan rates are unlikely to go down going ahead and will remain steady at below 7%.

Repo rate is the rate at which the RBI lends short-term funds to banks and reverse repo rate is the rate at which banks can park their funds with the RBI.

“Home loan rates have already touched the floor and do not expect further lowering of rates from here, but also don't expect any significant hardening...


RBI stance was expected and accordingly most home loan companies will also retain their benchmark rates so I don’t expect any hardening,” said Ajit Mittal, executive director at Indiabulls Housing Finance.

Echoing his view, Renu Sud Karnad, managing director of Housing Development Finance Corporation said, “Home loan interest rates are expected to remain steady in the near future while they are already at their all-time low at below 7%. In fact, the effective rates for loans upto 30 lakh goes below 3% for borrowers who avail government subsidies like credit linked subsidy scheme (CLSS) and also the fiscal benefits.”

The rise in home loan demand is reflected in home loan disbursement of the largest home loan provider HDFC. HDFC saw a 181% growth in individual loan disbursement in June quarter 2021.

Low home loans rates are not only benefitting the borrowers and the household sector, but are also doing good for the economic growth.

“In the credit market, transmission to lending rates has been stronger for micro, small and medium enterprises (MSMEs), housing and large industries. The low interest rate regime has also helped the household sector reduce the burden of loan servicing. The significant reduction in interest rates on personal housing loans and loans to the commercial real estate sector augurs well for the economy, as these sectors have extensive backward and forward linkages and are employment intensive, said RBI in its policy statement on Friday.

While RBI has kept the repo rate unchanged, the country’s largest lender, State Bank of India (SBI) has already announced some offers for low home loans. It has come up with ‘SBI Monsoon Dhamaka’ offer for the month of August with 100% waiver on processing fees on home loans.

Processing fee is a one-time charge to be paid by a home loan borrower to the bank or non-banking financial company (NBFC). SBI home loan interest rates start at 6.70%.

Currently there are reportedly almost 15 banks offering home loan interest rates of under 7%, compared to around 8.4% about 24 months back.

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