Buying a house is a huge financial decision for a lot of people, and with a home loan, it is an easy way to finance it without emptying your savings. However, it’s important to do your research because home loan interest rates differ from lender to lender, and even the smallest difference can result in huge savings over long tenures.
What Are Home Loan Interest Rates and How Are They Determined?
It is a percentage charged on the borrowed principal amount, levied annually by the financial institution. Some factors that influence the rate of interest are:
- Repo Rate: Financial institutions offer interest rates that are linked to RBI’s repo rate or use it as a benchmark. So, any change in this, changes your interest rate.
- Credit Score: If you have a credit score of over 700, then you are likely to get a better rate according to your profile.
- Loan Amount & Tenure: Bigger loan amount or longer tenures may lead to higher interest rates.
Current Home Loan Interest Rates Offered By Banks in India
| Bank | Approx Floating Rate (p.a.) | Fixed Rate Range |
| SBI | 7.50% onward | 7.50% p.a. onwards |
| HDFC Bank | 7.90% onward | Starting from 7.90% |
| ICICI Bank | 8.75% onward | 8.85% onwards |
| Axis Bank | 8.35% onward | Starting from 8.35% |
The above rates are subject to change as per the market factors and your application.
Why Do Bank Home Loan Rates Differ?
- Government Backing: Public banks may offer lower interest rates because of the financial support from the government, leading to low funding cost.
- Repo vs Internal Benchmarks: Some lenders change rates in accordance with the repo rates, but some rely on MCLR (Marginal Cost of Funds Based Lending Rate).
- Risk and Costs: The lender’s internal policies and costs leads to different rates.
Current Home Loan Interest Rates Offered By NBFCs in India
Are NBFCs Offering the Cheapest Home Loan Rates?
NBFCs usually offer higher interest rates compared to other lenders, but they provide more flexibility in terms of profile assessment, repayment, etc. Here a quick look at these rates:
| Financial Institution | Starting interest rate (in per annum) |
| Bajaj Finserv | 7.45% |
| PNB Housing Finance | 8.25% |
| Tata Capital | 7.75% |
| Other housing finance companies | 7.35% to 9.50% . |
Note that all these rates vary depending on the borrower’s profile.
Pros:
- Flexibility in documentation.
- Faster Processing.
- The desire to lend to non-standard borrowers.
Cons:
- Higher margins compared to home loan interest rates.
Why Should You Choose NBFCs Over Banks?
- If your credit score isn’t the best, you can still get funding from NBFCs.
- It’s tailored for the self-employed or for people who have irregular incomes.
- Provides speed, less bureaucracy, and customised repayment plans.
What Steps Can Reduce Home Loan Interest Rates?
- Maintain and improve your credit score.
- Compare lenders.
- Negotiate for discounts.
- Opt for floating-rate loans so that you can benefit from the rate cuts.
Challenges Borrowers Face
- Paying off hidden charges like processing fees or insurance.
- Confused on whether to go ahead with a fixed or floating rate loan.
- Starting rates are generally given to individuals with strong profile.
Comparing different rates from various banks and NBFCs is an essential part of your home loan journey. You should always assess the rates given and the other charges that come with it to truly understand the cost of borrowing. Trusted financial institutions like PNB Housing Finance provide home loans with reasonable rates and zero hidden charges to help you fulfill your home ownership dreams.
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