Home loans set to fall to historic low of 7.1% with rate cut

MUMBAI: Home loan rates are set to drop to levels last seen before the global financial crisis in 2008, with the RBI’s monetary policy committee reducing the repo rate by 25 basis points to 5.25%. Several banks — Union Bank, Bank of India, Bank of Maharashtra and Indian Overseas Bank — currently offer home loans at 7.35%. Borrowers at this rate will see their interest rate decline to 7.1%, which is also the deposit rate offered by some private banks. On a Rs 1 crore home loan for 15 years, a 0.25 percentage-point reduction in the rate reduces the EMI by roughly Rs 1,440 per month. Bankers say that for home loans to be priced at 7.1% for new borrowers, lenders will have to sharply cut deposit rates or revise the spread over the benchmark rate. If this happens, new borrowers cou