 "It's not the cheapest: What BoB's differential home loan rate means")
When Gerorge Orwell said, “All animals are equal, but some animals are more equal than others,” he was certainly not talking about the Indian home loan market. But, the home loan market in India, has pretty been unequal, with differential interest rates. In fact, there was a time when banks gave their new home loan borrowers, lower rates as compared to their existing borrowers. But, looks like this are changing, well almost.
According to a story published in Business Standard today , “Bank of Baroda, has put an end to differential home loan rates.” This means, that irrespective of the tenor or the amount of the loan, borrowers will have to pay the same rate. The bank also decided that it will charge its base rate of 10.25 percent for all home loans. Of course, the intention is purely to increase their loan business. The report quotes, Ranjan Dhawan, executive director, BoB, said they wanted to raise the average size of home loans. BoB planned to grow its lending by 18-19 per cent this year, a little above the sector average.
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As of now, BoB is the only bank which charges base rate to all its home loan borrowers across tenures and amount. Most other banks, however, have different rates for loan below Rs 30 lakhs and above Rs 30 lakhs.
Keep in mind that just because BoB charges base rate for all borrowers, does not mean it’s the cheapest. There are other lenders which charge a lower rate. Take for instance, State Bank of India, which charges 9.95 percent for loan amount less than Rs 30 lakh and 10.10 percent for loan amount more than Rs 30 lakh.
What we suggest you should know:
Base rate is a rate below which the bank cannot lend. When your loan is at base rate, when ever there is a movement in the base rate (upwards/ downwards), your interest rate on floating will move accordingly. Before going for the home loan, do compare the rate across a few lenders, you could do so using online loan portals. If you plan to switch to another bank, don’t simply take into account the loan interest rate, but also the cost of transferring the loan.