Public sector lender Bank of Baroda (BoB) on Monday lowered interest rate on home loans by 70 basis points (bps) to 8.35% – the lowest in the industry.
In doing so, the bank has decided to offer home loans at its one-year marginal cost of funds-based lending rate (MCLR) without any spread to customers with CIBIL score of 760 and above.
“We will also allow customers with CIBIL score of -1 to 0 (no borrowing record) to get this benefit,” a BoB official said. Following the cut, the home loan rate stands between 8.35% and 9.35%.
The bank has also waived-off switchover fees for existing customers who wish to shift from the base rate to MCLR. “In case of existing home loan borrowers of BoB, who are not yet converted to MCLR rate structure can avail of the benefit of reduced rate of interest by converting from base rate to MCLR without any additional charges,” the bank said in a statement.
BoB said on a home loan of R50 lakh, reduction in interest rate by 70 bps will help a home buyer save R2,496 per month and approximately R9 lakh during the loan tenure of 30 years.
The rate of interest on car loans and mortgage loans starts at 8.85% and 10.35%, respectively.
Meanwhile, Bank of India (BoI) has also revised its retail lending rates. Home loans will be available at 8.65% for women and at 8.7% for others, while vehicle loans will be offered at an interest of 9.35%.
FE had earlier reported that savings from the switchover to the MCLR are now very impressive – almost six-fold in some cases after the latest rate cuts – that more customers might migrate to it. For a R50-lakh loan from State Bank of India with a tenure of 20 years, a borrower can now save nearly R6 lakh.
Given SBI’s base rate is 9.25%, a customer would repay R1,11,46,423. A switch to the MCLR at 8.65% — 8% plus a spread of 65 basis points — would lower the repayable amount to R1,05,28082. Add the switchover fee of R25,000 and this would be R1,05,53,082. That’s savings of Rs 5.93 lakh.