When it comes to home loan, the interest rate is the most important part. Yes, it clearly decides how much in total you should pay for the property you buy. Therefore, lower rate is always better. So, do you wonder how much home loan rates today? Recently, in January 2017, the SBI has just reduced the rate to only 8% from 9.5% previously. Of course, this makes a huge difference. So, what should you do if you have been paying with the previous rate, is it possible for you to shift your home loan? Well, to find the exact answers, let find out what exactly happen to this new loan rate.
All bank and other financial institutions follow the MCLR model whereas the HFCs continue on Prime Lending Rate or PLR model. MCLR is benchmark rate below a rate that the bank can’t lend. Usually, it’s calculated based on certain formula that consists of 4 different variables including negative CRR carry cost, tenure premium, operating cost and marginal cost of funds. The earlier system for base rate is replaced by MCLR and also replaced PLR in the banks.
This shift is made based on certain reasons. The RBI aims to provide more quantitative, transparent and also market determined rates. Therefore, the MCLR comes as dynamic model that reflects the incremental changes and cost of funds on monthly basis. All home loans that are taken from April 2016 are on the MCLR. However, the prior home loans that are based on the PLR or base rate will be slower reacting to these changes in interest rates. In other words, the HFCs-based home loans still work on PLR model.
These changes affect the home loan rates to fell which dramatic which is around 50 bps. And now, the recent home is in range of 8% to 9.1% depending on type and ticket size of the loan. With this new interest rate amount and system, the borrowers enjoy more dynamic environment which is very beneficial to them. Of course this is a very good thing because they pay less than before. In long term, the amount of money that can save is actually quite big.
So, if you are planning to apply for home equity loan, it is the right time for you to do it. Find the best lenders and negotiate on the terms and home loan rates today so you can get the most beneficial one.