Banks Slash Home Loan Rates Following RBI Repo Rate Cut

Reserve Bank of India's recent decision to cut the repo rate by 25 basis points to 6.25% on Feb 7, 2025, sparking a renewed growth interest. Several Indian banks have responded to this rate cut by reducing their home loan interest rates.

This is the first repo rate reduction in almost five years, which will help to encourage economic activity by reducing the cost of borrowing. Such banks that have acted include three major institutions: State Bank of India, Bank of Maharashtra, and Punjab National Bank. They have significantly reduced their housing loan rates, hence making house ownership affordable to hundreds of millions of Indians.

Let's have a look at the home loan rate reductions in detail and how they will affect the overall market.

Home Loan Rate Reductions by the Three Banks

Following the RBI repo rate cut, many major banks have decreased their home loan rates. The major banks that have posted revised rates are SBI, PNB and  Bank of Maharashtra. Below is a detailed look at the revised home loan rates offered by these banks after the RBI's repo rate cut:

●      State Bank of India (SBI)

As one of India's largest public sector banks, State Bank of India has announced a reduction in its home loan rates by 25 basis points. The new rates will be effective from Feb 15, 2025, ranging from 8.25% to 9.2%, depending upon the borrower's credit profile and loan specifics. This rate reflects SBI's swift response to the RBI's policy change and leveraging its customer base to give the benefits of cheap borrowing costs.

●      Bank of Maharashtra

The Bank of Maharashtra has also reduced their home loan rates by 25 basis points, taking the home loan rates to a band of 8.1%. This rate cut was announced on or around Feb 24, 2025, making the bank a front-runner in home lending. The rate cut has appeal among price-sensitive homebuyers looking for low-cost financing options.

●      Punjab National Bank

Punjab National Bank has also emerged as one of the key players offering competitive home loan rates. The home loans for PNB now start at 8.15% per annum with no processing fees and additional documentation charges. Additionally, car loans are now offered at a starting rate of 8.6% per annum, while the PNB digi education loan is available at a very competitive rate.

These cuts are a direct result of RBI cutting the repo rate, reducing the price at which banks can get money from RBI. By transferring these savings, SBI, Bank of Maharashtra, and PNB are making purchases more affordable for potential homebuyers. It is cutting monthly equated monthly instalments (EMIs) and promoting increased involvement in the housing market.

Let's understand the implications of the rate cuts in the housing market.

Implications of the Rate Cuts In the Housing Market

The lowering of home loan rates by these banks will have a positive impact on the new house owners. Let's understand how they can benefit from it greatly.

●      Affordable EMIs: For example,  If a person has a  ₹50 lakh home loan with a 20-year tenure, a drop from 8.75% to 8.50% will reduce the EMI by more than Rs 10000 annually. Meanwhile, the Bank of Maharastra's 8.1%  rate would help reduce EMI and enhance affordability further.

●      Boost to Housing Demand: Lower house loan rates are likely to attract first-time buyers and middle-class families. It will increase demand for residential properties and potentially reduce the burden on the real estate sector.

●      Economic Ripple Effects: Affordable home loans can stimulate construction activity and related industries, contributing to job creation and overall economic growth.

Conclusion

Overall, these moves by SBI, Bank of Maharashtra, and PNB to lower home loan rates in the wake of the RBI repo rate cut, constitute a key direction towards reviving the housing sector. With their new rates commencing as low as 8.10% to 8.35% and reaching 9.2% to 10.90%, these lenders are opening the door for easier homeownership and paving the way for a benign influence on both the realty market and the Indian economy as a whole.