Cheaper home loans as Central Bank, BoM cut rates by 0.25%

In order to prop up the sagging home loan market, state-run lenders Central Bank of India (CBI) and Bank of Maharashtra (BoM) have announced slashing of interest rates by up to 0.25%, and also decided to waive the processing fees.

Pune-headquartered BoM has decided to give housing loans under Rs25 lakh for a five-year tenor at the reduced base rate (below which it cannot lend) of 10.60%, it said.

Similarly, the Mumbai-headquartered CBI has cut home loan rates by up to 0.25%, it said. A home loan of up to 25 years and under Rs30 lakh will be available at 10.75%.

Both the lenders have also announced waiver of processing charges. While CBI is offering a blanket waiver of processing fees for loans across amounts and tenors till March 31, BoM has waived it only for applications under Rs25 lakh.

BoM charged up to Rs12,500 for such loans in the past.

High inflation and the ensuing jacking-up of interest rates by the RBI, coupled with the uncertainties on the economic growth, are believed to have dampened the home loan market.

According to the Reserve Bank's Financial Stability Report released on January 12, the housing credit growth fell to 2.3% from 10.7% a year ago.

The country's largest lender State Bank of India is also contemplating a cut in interest rates in select home loan categories where demand is slow.