A new trend has emerged, which seems to be good news for both you and your lender. With the NDA government winning General Elections 2019, predictions are made that its focus would be on further stabilizing the bank's lending rate.
Borrowers can pay less on their mortgages as banks shift to a new system of linking such loans this week to benchmarks prescribed by the central bank.
Loans are expected to become cheaper as the banks will link interest rates on loans to retail and small business borrowers.
To aid effective downward transmission of the RBI's policy rate cuts, the central bank had on 4 September said that the lenders must link all new floating-rate loans for housing, auto, and micro, small, and medium enterprises (MSMEs) with the external benchmark.
It is expected that the home loans of above Rs 30-75 lakhs would be available at an interest rate of 8.25 percent. After the Finance Ministry's reforms measure, the financial banks of India came up with the latest development.
The Reserve bank Of India said that due to various reasons, the transmission of policy rate changes to the lending rate of banks under the current marginal cost of funds based lending rate (MCLR) framework has not been satisfactory.
Therefore, banks must link all new floating rate personal or retail loans to MSMEs to make the transmission of monetary policy more effective to boost credit growth, consumption, and investment to revive the economy. However, there could be additional charges added on to this based on the profile of the customer.
New home loan borrowers can now start exploring home loan options with the banks. Do not merely look at the bank’s MCLR but know the actual home loan interest rate before finalizing the deal. Banks are allowed to charge an MCLR before disbursing the loan. Finally, make a pre-payment to repay the home loan as soon as possible and own your home with 100 percent equity of your own.
