Bank of Baroda cuts home loan interest rate for these borrowers; know new rate, who are eligible

In a bid to provide some relief to thousands of borrowers, Bank of Baroda has announced a concession on home loan interest rates. The bank has cut its interest rate on home loans by 25 basis points (bps) for select borrowers, according to a press release. Bank of Baroda now offers home loans starting from an interest rate of 8.25 per cent per annum. The reduced interest rate is effective from November 14, 2022.

Who are eligible for reduced home loan interest rate?
This special rate of home loan is available only for borrowers applying for a fresh home loan with Bank of Baroda, stated the press release. Customers who want to transfer their home loan balance to the state-owned bank will also be eligible for this special rate, the lender said. Additionally, the bank also removed the processing charges for home loans. Do remember that this new rate will also depend on the credit profile of the loan borrower.

"This is one of the lowest and most competitive home loan interest rates in the industry," the lender said. This special rate on a home loan is available till December 31, 2022.


However, the existing home loan borrowers of the Bank of Baroda will not get the benefit of this reduced interest rate.

“In a scenario where interest rates are on an upward trajectory, we are pleased to drop our home loan interest rates and introduce a special, limited period home loan interest rate offer of 8.25 per cent, making home purchases that much more affordable for home buyers," said H T Solanki, General Manager - Mortgages & Other Retail Assets, Bank of Baroda.

How will this rate cut impact your home loan EMIs?
For instance, you are planning to take a home loan of Rs 30 lakh at a special interest rate of 8.25 per cent per annum for a tenure of 20 years. Then, you have to pay an Equated Monthly Installment (EMI) of Rs 25,562.

At present, the public sector bank offers home loans starting at an 8.5 per cent interest rate per cent. For a home loan of Rs 30 lakh at an interest rate of 8.5 per cent per annum for a tenure of 20 years, the EMI will be Rs 26,035.

So, under the special rate, the EMI would be lowered by Rs 26,035-Rs 25,562 = Rs 473.

Back-to-back RBI repo rate hikes and their impact on home loans
With the Reserve Bank of India (RBI) hiking repo rates by 190 basis points (bps) in a short period (May till September 2022), banks have started increasing their interest rate for home loans. Home loan borrowers have witnessed a steady increase in their EMIs and overall costs in the last few months.

"Home loan interest rates may increase now, leading to short-term turbulence on overall housing demand. The recent consecutive repo rate hikes had already added to buyers’ overall acquisition cost," said Ramani Sastri - Chairman & MD, Sterling Developers Pvt. Ltd.

"The impact of rate hikes will be predominantly on the affordable housing side, which is primarily driven by sentiments and especially first-time home buyers who are heavily reliant on home loans," said Lincoln Bennet Rodrigues, Chairman & Founder, of the Bennet and Bernard Company, known for luxury themed homes in Goa.