One of the key benefits that came out of the demonetisation drive that shook our country last year, was that it helped banks in slashing their home loan interest rates. This happened, because of the huge cash inflow that the banks saw during the demonetisation. As a result, the New Year brought good news in the form of slashed home loan interest rates, with some banks slashing their interest rates by as much as 50 basis points or bps. This is a great news for both, new borrowers and existing home loan borrowers. Here is how everyone is going to benefit from this reduction in home loan interest rates.

1.      Women borrowers: Women borrowers are going to receive extra benefit from some banks. In some cases, they may see a slash of an extra five basis points in their home loan interest rates.

2.       New borrowers: These are the people who will benefit the most from this reduction in interest rates. Slashed interest rates means that more and more people are now eligible for home loans. This is how it works, if a person who’s income is Rs. 1 lakh was eligible for a home loan of Rs. 55 lakh for a tenure of 20 years, before this dip, if the bank capped the EMI at 50% on the borrower’s monthly income. The same applicant is now eligible to get Rs. 58 lakh as a home loan. This also means that borrowers can receive loans for a longer tenure.

3.      People with existing loans: People with existing loans will also benefit from this dip in interest rates. Their banks and providers will reduce the tenure of their loans. They will not revise the EMIs but they will revise their payment tenure.

4.       People with MCLR linked home loans: These are the borrowers who are set to benefit the least since their loans and rates will not be revised immediately. Banks haven’t set a period for the revision of rates on these loans. They may change in a few months or they might take a whole year, there’s no telling. Even if the rates dip for this loan, the borrowers will not receive any benefits immediately. But if you wish to opt for a Marginal Cost of Funding Lending Rate (MCLR) linked home loan, at this time, then we would suggest that you opt for one that offers revision of MCLR on a quarterly basis.