In the series of reducing home loan rate as the post-effect of demonetization, Bank of Baroda has top the chart in slashing down the interest on home loans now at 8.35%. Bank of Baroda even outsmarted State Bank of India in this context by passing the benefits to new as well as existing borrowers.
As a strategy to attract rivals’ customers, Bank of Baroda also waived off the switching fee to convert the base rate loan to the cheaper loans. The reduced rates are effective with a cost somewhere between ₹ 5,000 to ₹ 10,000 as switching fees in all the banks. But against the current market norm, Bank of Baroda even waived off this cost of switching for the existing customers. The benefit has been extended to the housing finance companies besides existing home loan buyers for transferring their loans to Bank of Baroda free of cost.
The bank has revised it’s Marginal Cost of Funds based Lending Rate (MCLR) from 9.05% to 8.35 % which resulted in the reduction of interest rate by 0.7%. So for a home loan with a principle amount of ₹ 50 Lakh, the total saving for a month comes out to be ₹ 2,496 per month and a whooping ₹ 9 lakhs for tenure of 30 years. These reduced rates are lowest among all private and public banks, housing finance companies and non-banking finance companies as well.
Bank of Baroda issued a recent statement explaining the cause of this reduction. As the MCLR dips down from 75 bps to 55 bps, the same resulted in the fall of home loan rates by 70 bps effective from January 7, 2017.
While HDFC, ICICI and Indiabulls are charging an interest of 8.65% to women borrowers, State Bank of India is offering it at a marginally lower rate at 8.6% for loans for the amount up to ₹ 75 lakhs. The same differential in interest is applicable to other borrower’s upto ₹ 75 lakhs with State Bank of India. SBI is considered as the largest mortgage lender but still Bank of Baroda took the in slashing down rates and introduced a stiff competition in the market.