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


  1. Dear Suresh,

    Currently i am working in mumbai and my permanent home is in hyderabad. which is own by my parents name. Now i am looking for home loan to construct 2nd Floor.

    Please suggest whether will i get home loan and which bank provide loan easily.

    Thank and regards,

    1. Nadeem, You need to convert such property into join ownership (by gift deed) to you as well.  Alternatively you can take loan on your parents name and you could be co-applicant. Pls talk to one of the bank and they would guide you

  2. Sureshji,

    As you already know I always takes your suggestion before doing any investment. I trust and respects your suggestion. This time I am in dilemma for buying property. I am planning o biuy 1 RK(380 sq ft) with open terrace(110 sq ft) for 27 lacks including all. This is 20 years old building. I have 10lac cash with me and go with approx 18lac loan.

    Currently, I am getting 10K income from one property and 7K will come from this new propety. I don’t have any loan liability. So, Could you please suggest me whether shall I go by purchasing it or shall I keep my \saving 10 lac in FD. If you will not suggest buying it then please provide some alternatives.


    1. Hi Rajesh, If you are referring RK as room and kitchen of 380sft for Rs 27 Lakhs, i feel it is very high. But you can take that call based on the area where you are buying. Unless you expect good growth in your real estate property, investing in such properties may not be appropriate. You can invest in bank FD instead.

  3. Dear Mr.Suresh
    Reducing the interest rate of home loan and other loans may be good for those who are rich or monthly salary persons but normal poor people like me it is pain because due to reducing loan interest FD rate also reducing also banks trusting people like me on FD only

  4. Dear Suresh.. I have been reading your articles for quite some time.. Your doing a really good job.. I have a took home loan from LIC Housing Finance. Should I expect they will also reduce the rate or switching my loan to HDFC would be better idea. Please Advise – Manivannan

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