The Reserve Bank of India has paused interest rate hikes for now to assess the impact of the previous hikes in taming inflation. The move has brought some relief to borrowers reeling under the burden of costlier loans following the 2.50% repo rate since May 2022.
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The consistent rate hikes have made home loans costlier. While existing borrowers are witnessing their home loan EMIs and tenures shooting up, prospective borrowers, too, may find loan rates costlier to manage. In this scenario, it is now more important than ever, for borrowers to focus on reducing their EMI burden.
One effective method of doing that is to refinance your loan to a lower interest rate or switch to a lower interest rate spread. Home loan spreads have a direct bearing on your home loan and can help you save on interest. A home loan spread rate is the difference between the rate at which a bank gives loans and the rate that it offers on deposits. This rate differs for different borrowers and remains constant for the tenure of your loan. Lenders calculate the spread rate based on the applicant’s credit score, income, and the requested loan amount.
Then applying for a home loan, check the spread rate that the lender applies to the rate they offer you. A lower spread rate can help you rake in savings since a drop in the repo rate will lower your overall interest outgo.
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In the case of floating rate loans, be prepared for interest rate resets that accompany repo rate revisions. If you have more than half of your loan tenure remaining when the interest rates are reset, try switching to a lower interest rate. Before switching to a lower interest rate, calculate if the switch brings you savings. This is because refinancing your loan or switching to a lower spread rate will be accompanied by additional costs in terms of processing.
Currently, banks are offering home loans at competitive interest rates. If you’re shopping for one, compare what different banks are offering and choose one that fulfils your requirements.
| Bank | Interest Rate Range(Floating; Loans |
| Axis Bank | 8.75-9.15 |
| Bank of Baroda | 8.60-10.60 |
| Bank of India | 8.65-10.75 |
| Bank of Maharashtra | 8.40-10.45 |
| Canara Bank | 8.85-11.25 |
| Central Bank | 8.60-9.35 |
| DBS Bank | <=10.20 |
| Federal Bank | 10.15-10.20 |
| ICICI Bank | 9-9.80 |
| Indian Bank^ | 8.45-9.4 |
| IOB | 9.55 |
| IDBI Bank | 8.75-12.25 |
| J&K Bank | 9.45-9.55 |
| Karnataka Bank | 8.75-10.43 |
| Karur Vysya Bank | 9.23-12.13 |
| Kotak Mahindra Bank | 8.85-9.40 |
| Punjab National Bank | 8.65-9.45 |
| Punjab & Sind Bank | 8.85-9.95 |
| RBL Bank | 9.15-11.55 |
| State Bank of India | 9.15 – 9.75 |
| South Indian Bank | 9.85-12.60 |
| Tamilnad Mercantile Bank | 9.10-9.60 |
| UCO Bank | 8.85-10.40 |
| Union Bank of India | 9.0-10.50 |
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Disclaimer: Interest rates that vary with tenures or credit scores within the specified loan amount are indicated as a range. Data taken from respective bank’s websites on May 05, 2023. *Annual percentage rate; ^as on 21 Apr 23
