New home loan borrowers have been flooded with several low rate offers with loan rates dropping to a low of 9.15% to 9.20% with women borrowers enjoying a 0.05% per annum advantage over their male counterparts. Of course as is usually the case, the reduced rates are available only to new borrowers and not for existing borrowers.
On paper, for loans below Rs 75 lakh, the State Bank of India has a slight rate advantage of 0.05% per annum which is not significant. Almost all lender rates are around 9.15% to 9.20% for home loans below Rs 75 lakh which means that you really cannot choose based on interest rates alone.
For higher loan amounts, foreign banks as well as private sector banks are active and though the “on paper” quoted rates are much higher, they are perfectly willing to bring it down to regular home loan rates of around 9.20% or so for excellent home loan borrowers. Excellent home loan borrowers are those with a good credit track record who are interested in buying properties that are ready-for-occupation or nearly ready.
The bigger action in the high ticket home loan market (over Rs 75 lakh) is for what is called the offset home loans. Offset home loans are offered by only a few lenders such as SBI (Max gain), HSBC, Standard Chartered, Citibank, IDBI Bank, Bank Of Baroda, IDFC Bank and DBS. Offset home loans are advantageous for home loan consumers because a current/savings account is linked to the home loan and any balance in the linked bank account is deducted from the principal portion of the home loan. In short, it allows the flexibility of putting in any temporary (or permanent) surplus in a linked bank account and saving interest at the home loan rate on that surplus with the flexibility to withdraw it at a moment’s notice. Here the foreign banks dominate the show because they provide extremely competitive rates as low as 9.30% to 9.40% as compared to 9.60% for SBI max gain.
And if as an existing borrower you are feeling left out of the party, you have only yourself to blame. Just shift your loan and hey presto you will become a “new borrower” for the new lender with current low rates. In the current competitive environment for excellent borrowers it should be possible to shift your loan to a new low rate without incurring any charges at all except some stamp duty charges in states like Maharashtra. Just negotiate hard and don’t hesitate to use the offers available in the market.
Harsh Roongta is a SEBI registered investment adviser. He can be contacted on HT@harshroongta.com