HDFC, one of India’s oldest housing finance companies, said it has slashed the interest rate on its home loans to 6.7% for those with qualifying credit scores.
The rate of 6.7% is one of the lowest interest rates charged by any bank or housing finance companies in India at present. The closest competition is with Citibank and Bank of Baroda, which offer home loans starting at 6.75%.
Most of the big banks in India charge an interest rate of around 6.9% per year on home loans, including most of the public sector and front-line private sector banks. LIC Housing Finance too charges around 6.9%.
Even before the cut, HDFC was offering one of the lowest interest rates for home loans at 6.75%.
A cut of 5 basis points translates into savings of tens of thousands of rupees.
For example, a cut of 5 basis points (6.75 to 6.70) in the interest rate on a 25-year home loan of Rs 45 lakh reduces the total repayment amount by Rs 42,581, and the monthly EMI by around Rs 200.
It should be noted that lenders, including HDFC Ltd, offer their lowest rates only for those with good credit scores.
For those with less than stellar credit scores, the rates are increased to offset the risk of default.
The bank said the new rate is applicable to all new loan applications irrespective of the loan amount or employment category and only to those who take a home loan before October end.
“Housing is much more affordable today than it ever was. In the last couple of years, property prices have more or less remained the same in major pockets across the country while income levels have gone up. Record low interest rates, subsidies under PMAY and the tax benefits have also helped,” said Renu Sud Karnad, Managing Director, HDFC
Ltd.