Opting for home loans to buy houses can be a tricky business as people often get trapped in the cycle of excessive debt due to poor financial planning. But some of you can now take a sigh of relief as the Pune-based Bank of Maharashtra (BoM) has reduced home loan interest rates by 20 basis points to 8.40 per cent — one of the lowest in the banking industry.
The move was strategically made to attract new borrowers and push loan growth ahead of the fiscal closure. The state-owned lender is the second — after the Bank of Baroda — to cut home loan interest rates. Bank of Baroda slashed the rate by 40 basis points last Friday, to 8.50 per cent. BoM managing director AS Rajeev told Economic Times, “It’s a business strategy to further improve the quality of retail advances, especially home loan advances,” in response to a query about why the bank decided to reduce home loan interest rates even as the rate tightening cycle is not over yet.
Rajeev also revealed that the lowest rates offered are for the best borrowers who have high CIBIL scores. These borrowers fall into a group that has zero defaults. The bank has also made the move to improve its cross-selling opportunities with the increasing borrower base. Rajeev further said that borrowers with high CIBIL scores generally have “reasonably good savings balances” and they end up buying around four products in total.
“During the current month, there is an upward trend in CASA (current and savings account) and thereby slight benefits in interest rate margin, which we are passing on to customers,” the MD revealed. The bank had already waived the processing fee for home, gold and car loans.
Some of the lowest interest rates offered by other banks and housing finance companies are as follows:
GIC Housing Finance- The company offers an interest rate of 8.10 per cent. The EMI on a Rs 75-lakh home loan with a 20-year tenure is Rs 63,201 per month.
HDFC Bank- The interest rate offered on home loans is 8.45 per cent.
PNB Housing Finance- The bank charges an interest rate of 8.50 per cent currently.
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