Home Loan Rate War – Why Banks are reducing home loan rates?

Home Loan Rate war-Why banks reducing home loan ratesHome Loan Rate War – Why Banks are reducing home loan rates?

Last week HDFC has reduced home loan interest rates to 9.9% and it was really a great news for home loan seekers. Last Sunday, 3 days back, SBI has announced a home loan rate cut to 9.85% for women and 9.9% for others. Why there is home loan rate war now? Who are the other banks or financial institutions who have reduced home loan rates now? Are there further home loan rate cuts expected?

Also Read: Fixed Rate Home Loans Vs Floating Rate Home Loans – Which is better option?

Who initiated this home loan rate cut?

Last week HDFC has announced that home loan rates would be at 9.9%. In recent times, home loan rates touched upto 10.4%. Since this is long term commitment, margin lower rate in home loan would make big impact. It was a good news for individuals who were wishing to buy their dream home with home loans.

Then, what happened in the home loan rate war?

Soon after this, last Sunday, State Bank of India (SBI) has announced home loan rates of 9.85% for women and 9.9% for others. To the surprise, ICICI Bank, Dewan Housing Finance, India Bulls financial services etc., have announced home loan rate reduction to 9.9% in par with SBI and HDFC.

ICICI Bank has reduced fixed rate home loans of 10 years tenure upto Rs 30 Lakhs to 9.9%. ICICI Bank indicated that the same applies for floating rate interest rates too as of now in a statement released yesterday (Tuesday).

Dewan Housing Finance and India Bulls Financial Services, who are other leading home loan providers have announced rate cut of their home loan rates of 9.9%.  We are yet to hear from LIC Housing Finance Limited who is another non banking institution and leading home loan provider.

What is making these banks / financial institutions to reduce home loan rates?

Now, you would love the reasons behind this.

RBI has been making key policy rate cuts. It happened in last 2 monitory policy reviews. However, banks and financial institutions are silent and enjoying home loan rates as is. In recent RBI annual policy statement, Dr.Raghuram Rajan (RBI Governor) has stressed this. Generally, banks or financial institutions would follow leaders like SBI, HDFC etc., When HDFC started this home loan rate war, now others are following this. I am sure other banks and financial institutions would follow in coming weeks and reduce home loan rates.

Also Read: How to close your home loan faster than you every thought?

Are further home loan rate cuts are expected?

There are several factors that indicate further rate cuts. They would influence home loan rate too. The credit growth rate has fallen to 10.2% this fiscal year, which is lowest in last 20 years. Corporates take loans at competitive rates and it involves risk. Personal Loans, on the other hand comes with high rates, but high risk. Hence, banks have been betting on home loans as they are less risk compared to other loans and have longer tenure. We may expect further rate cuts from RBI in the future and home loan rates may come down further. I bought home loan at 10.2% rate just 4 months back. If you are looking to buy home, you should participate in this home loan rate war and should get benefitted. You can even wait for few more months and may get lower rates too.

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Home Loan Rate War – Why Banks are reducing home loan rates

Suresh KP


  • chinu

    Hi sir thank you for your guidance for sep I have 1more questions suggest me mutual funds name for long term investment around 15 to 20 year for child education and marriage. .

  • bhanu prasanth

    Yes. Its a good thing going on now. I recently took SBI home loan @10.15 and it is now automatically changed to 10%

  • Ajit

    Sir, I have taken a home loan at 10.25% last year from BOB. Would it be advisable to transfer this loan to other bank offering lower interest rate now ? Warm regards. Ajit.

  • Dhruv

    Hi Suresh,

    Will this rate cut be applicable for all current home loan buyers?
    Or we have to send application to our banks or something like that?

  • Rahul B. Ratunawar

    Dear Suresh sir
    U r doing wonderful job..I am always fan of ur readings..I read each n every mail of urs carefully. Due to ur informative mails,I learnt lot of things ..ur information is always in details. U r trying to explain various issues by past-Present-Future angle. Keep this work continue & delight us by ur variety of mails..

    Thank u .

    God bless u..


    Rahul B. Ratunawar

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