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Home loans to get cheaper after RBI cuts rates at last

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If you're planning to buy a home, there's good news around the corner. On Tuesday, the Reserve Bank of India (RBI) announced a long-awaited cut to its main interest rate, goading banks into reducing the cost of housing loans.

In its first rate cut in nine months, the RBI said it would lend to banks at 7.75% instead of 8%, enabling them in turn to offer cheaper loans for home, auto and corporate borrowers.

But existing home loan borrowers on floating rates should not expect their monthly instalment payments to fall immediately. Banks usually offer the lower interest rates to new customers. What existing customers can do is to avail the option of pre-paying their current loans by borrowing from another bank offering the new, lower interest rates.
The RBI also cut the cash reserve ratio (CRR) - or the proportion of their deposits banks have to park with the central bank - by 0.25 percentage points to 4%. This will leave banks with an additional Rs. 18,000 crore to lend to customers, also potentially spurring the housing market. Public sector lender IDBI Bank announced a 0.25 percentage point cut in its lowest lending rate or base rate, a rate usually offered to bulk corporate borrowers, to 10.25 % effective from February
 
 
 
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