As with any loan, the interest rate plays an important role in determining which the lender a borrower will take the home loan from. Many home loan borrowers while scouting for home loans are often taken by surprise that the widely advertised lowest rate are not offered to them. This happens because the lowest interest rate offered by the lenders are often for home loans below Rs 30 lakh.
Added to this, there are various other factors that will influence the final interest rate that the lender will offer the borrower on the home loan. Knowing these factors will help you in selecting the right lender for your home loan needs.
Why you must scout for the lowest rate
Interest rate of your loan determines how much cost you pay for the borrowing. For longer tenure loans, even a minor change in interest rate can have a big impact on the overall cost that one will pay for the loan. Therefore, when it comes to a home loan, which usually has the longest tenure, the interest rate that you pay assumes highest significance.
A lower interest rate not only saves your hard-earned income from going toward interest payment but also increases your affordability. Lower interest means that you can afford a higher loan amount.
Home loan rate at historical Low
Most of the home loans currently being offered by lenders come with floating rate of interest which means that the interest rate can change with time. These floating rate home loans offered by banks are linked to an external benchmark and changes if there is a change in the benchmark. Most of the banks have kept RBI’s repo rate as their external benchmark.
Here is a look at the interest rates on home loans offered by public sector banks, private banks and non-bank companies.
Home loan above Rs 30 Lakh & up to 75 Lakh
| PUBLIC SECTOR BANKS | |
| Name of Lender | Interest Rates (%) |
| Punjab & Sind Bank | 6.65-7.60 |
| Bank of Baroda | 6.75-8.35 |
| Punjab National Bank | 6.80-7.90 |
| Central Bank of India | 6.85-7.30 |
| UCO Bank | 6.90-7.25 |
| Union Bank of India | 6.90-7.65 |
| State Bank of India | 6.95-7.65 |
| Bank of Maharashtra | 6.90-8.40 |
| Canara Bank | 6.90-8.90 |
| Bank of India | 6.95-8.35 |
| IDBI Bank* | 6.95-10.05 |
| Indian Bank** | 7.10-7.35 |
| Indian Overseas Bank | 7.15 |
| PRIVATE SECTOR BANKS | |
| Name of Lender | Interest Rates (%) |
| Kotak Mahindra Bank ^ | 6.65-7.30 |
| ICICI Bank | 6.75-7.45 |
| Axis Bank | 6.90-11.50 |
| HSBC Bank | 7.20-7.75 |
| Karur Vysya Bank | 7.20-9.55 |
| Karnataka Bank | 7.50-8.75 |
| Federal Bank | 7.70-7.75 |
| Dhanlaxmi Bank | 7.85-9.00 |
| South Indian Bank | 7.95-9.45 |
| Tamilnad Mercantile Bank | 8.25 |
| Bandhan Bank (GRUH Home Loan) |
8.50-11.25 |
| RBL Bank | 10.20-10.70 |
| HOUSING FINANCE COMPANIES (HFCs) | |
| Name of Lender | Interest Rates (%) |
| Bajaj Finserv | >=6.75 |
| LIC Housing | 6.90-8.05 |
| Tata Capital | >=6.90 |
| HDFC Ltd.*** | 7.00-7.55 |
| PNB Housing | 7.35-9.55 |
| GIC Housing Finance | >=7.45 |
| Repco Home Finance | >=7.75 |
| Indiabulls Housing | >=8.65 |
| Aditya Birla Capital | 9.00-12.50 |
| Reliance Home Finance | 9.75-13.00 |
*10 bps concession for women borrowers under limited period offer. Conditions apply.
**Interest rate of 6.85%-7.00% p.a. offered under IND AWAS Scheme
***Special interest rates available under limited period offer. Valid for disbursements availed on or before 30th June 2021
^ Special HLBT rates starting at 6.65% p.a. for any loan amount.
Rates as on 24th May 2021
Source: Paisabazaar.com
How to get the lowest interest rate
The lowest rate offered by lenders is limited to a select set of borrowers who meet a specific set of conditions set by the lenders. These conditions are broadly on the basis of overall profile, credit score, nature of profession, extent of loan, repayment capacity etc.
When it comes to nature of profession lenders prefer giving the best rate to salaried people. “Salaried borrowers have lower credit risk for the home loan lenders than self-employed ones due to higher income certainty of the salaried borrowers. Hence, many lenders tend to pass on the benefit of lower credit risk to the salaried borrowers by charging them lower interest rates. Some lenders also offer 5 bps concessions in interest rates to home loan accounts having women co-applicants as their contribution towards promoting financial inclusion and property ownership among women,” says Ratan Chaudhary – Head of Home Loans, Paisabazaar.com.
For instance SBI charges a premium of 15 bps over the card rate for non-salaried borrowers.
Similarly, lenders offer the best rate to borrowers with high credit scores while they will charge a premium for lower scores. For instance,
gives the best rate only when the CIBIL credit score of the borrower is above 700. SBI charges a premium of 10 bps above the card rate for customers falling under RG (4 to 6), i.e., those with a low credit score. (RG is an internal metric SBI uses to assess the risk associated with a borrower.)
So, before you apply for a home loan do get your credit report and check the credit score as it will help you in finding the best rate.
Also Read:
How to check your credit score
Besides this, there may be a discount for digital application as well. SBI offer a 0.05% concession if you apply for you loan via its mobile banking application, YONO. Keeping these factors in mind will help you in getting a home loan with the lowest possible interest rate.
