Latest news with #CostofFunds-basedLending
India Today
07-05-2025
- Business
- India Today
HDFC Bank trims these lending rates from May 7. Will your EMIs go down?
HDFC Bank has lowered its lending rates on certain loans, bringing some relief to borrowers. The bank has reduced its Marginal Cost of Funds-based Lending Rate (MCLR) by up to 15 basis points (bps). A cut of 15 bps means an interest rate drop of 0.15%. The new rates take effect from May 7, 2025. Now, HDFC Bank's MCLR ranges from 9.00% to 9.20%, depending on the loan tenure. Earlier, these rates were between 9.10% and 9.35%. This reduction could bring some relief to borrowers through lower EMIs (equated monthly instalments) or shorter loan tenures, whose loans are linked to MCLR. WHY IS THE BANK REDUCING RATES? This move comes shortly after the Reserve Bank of India (RBI) cut the repo rate by 25 bps in April, taking the total cut to 50 bps since February 2025. When the repo rate goes down, it reduces the cost of funds for banks. Many lenders, including HDFC Bank, are now passing on this benefit to customers by lowering their lending rates. WHAT IS MCLR AND WHY DOES IT MATTER? MCLR stands for Marginal Cost of Funds-based Lending Rate. It's the minimum rate below which a bank cannot lend, unless allowed by the RBI. It is the benchmark rate that banks use to decide the interest on floating-rate loans like home loans, car loans, and personal loans. If you've taken a loan linked to the MCLR, a cut in this rate could mean either your EMIs go down or your loan gets repaid faster. However, this change depends on your loan's reset date and whether it's a fixed or floating rate loan. NEW MCLR RATES AT A GLANCE HDFC Bank has trimmed its MCLR rates across various tenures. The overnight and one-month rates are down by 10 bps to 9%. The three-month rate has dropped 15 bps to 9.05%, while the six-month rate is now 9.15%. The one-year MCLR stands at 9.15% after a 15 bps cut, and both the two-year and three-year rates have been reduced to 9.20%.
Economic Times
02-05-2025
- Business
- Economic Times
Interest rates are falling, time to switch your home loan regime: Save above Rs 8 lakh by switching to EBLR; Know how
What is EBLR? Live Events How much savings in monthly home loan EMI can you expect after switching to EBLR rate? Home loan's outstanding balance: Rs 30 lakh Remaining tenure of the home loan: 15 years EBLR EMI at 8.65%: Rs 29,807 Table showing the calculation of home loan EMI savings on switching to EBLR Interest Rate Regime MCLR BPLR Base rate Existing interest rate 9% 11.15% 10.40% Current EMI Rs 30,428 Rs 34,381 Rs 32,976 Monthly savings by shifting to EBLR Rs 621 Rs 4,574 Rs 3,170 Annual savings by shifting to EBLR Rs 7,457 Rs 38,036 Rs 32,976 Total Savings during repayment Rs 1,11,859 Rs 5,70,540 Rs 8,23,402 What are the charges which bank levy for such a shift in interest rate regime and generally how long does it take for such a request to process? Interest rates have started falling recently, with most of the lenders reducing their interest rates after the Reserve Bank of India (RBI) cut the repo rate by 0.5% within a span of two months. The lower interest rates will result in huge savings for home loan borrowers, as their home loan EMI will come down. If they decide to pay the same EMI amount, despite a rate cut, their home loan will be repaid much faster, and they will save a good amount on interest. However, not all home loan borrowers will benefit equally. The benefit of these cuts depends on their interest rate the biggest question is: which interest rate regime will offer you lower home loan EMIs? There are four interest rate regimes, which vary based on the timing of your home loan acquisition. Borrowers who secured their home loans before 2010 had the option to take them on the BPLR rate, and those who took their home loans between July 1, 2010, and March 31, 2016, had to take them on the base rate. Similarly, those who took their home loans between April 1, 2016, and September 30, 2019, had to take them on a Marginal Cost of Funds-based Lending Rate (MCLR). However, from October 1, 2019, the External Benchmark Lending Rate (EBLR) replaced MCLR. So, the question arises—which interest rate regime (BBLR, base rate, MCLR or EBLR) can make the case for a lower home loan interest cost and thus a lower home loan EMI?Read below to find out how much money you can save by switching interest rate to or External Benchmark Lending Rate, is a framework used by banks in India to set interest rates on home loans, where the rates are directly linked to an external benchmark, such as the RBI's repo rate. This means that when the RBI adjusts its repo rate, EBLR-linked loan rates can also who took out a home loan before EBLR have to pay a higher home loan EMI. This is because the EBLR rate is considered one of the most competitive rates amongst all regimes, and now it offers one of the lowest interest rates after the RBI cut the repo rates twice by 0.25% in its last two monetary policy Kumar, a SEBI-registered RIA and Founder of SahajMoney, says, 'EBLR is directly linked to the RBI's repo rate (6.00% (repo rate) + 2.65% spread), making it more transparent and reflective of interest rate scenarios.'While EBLR was launched, banks offered all existing borrowers the option to switch to EBLR; however, not all borrowers exercised that you are among them, then chances are that you would still be paying a higher interest rate on your home loan. It is the time to check the interest rate on your home loan and take action to save on the interest amount that you are paying just because of being to CEO Adhil Shetty, the older benchmark rates are stickier in comparison to BPLR. 'Around 40% of all floating rate bank loans are still on MCLR and BPLR, where the rates may be much higher compared to repo-linked loans. So, it's advisable to speak to your bank and convert your loan to a repo-linked one,' he home loan interest rates are falling, calculations show that it is beneficial for borrowers to shift to EBLR rate if their home loan is under MCLR or base rate or BPLR per the calculations, if the EMI on EBLR rate (8.65%) is Rs 29,807 then you can save up to 38,036 in a year in comparison with BPLR. In comparison with MCLR you can save up to Rs 7,457 in a SahajMoneyAssumptions:1. BPLR rate is after 4% discount by bank2. In EBLR there are 2 additional charges CRP (Credit Risk Premium) and BSP (Business Strategic Premium) that change with credit profile and with product. We have considered only 8.65% without CRP and BSP.3. EBLR stays constant at 8.65% and other interest rates does not can change your home loan interest rate regime any day you wish as your bank will process your request if you apply to switch your home loan to Sharma, Founder- Radian Finserv, says, "Banks typically charge a nominal conversion or administrative fee, around Rs. 5000 + GST. The shift usually takes 7 to 15 working days, depending on the bank's internal process and borrower documentation. It's a one-time cost that can result in long-term savings."Shetty agrees with Sharma and says if you are converting your loan with the same bank, you are usually charged a processing fee. The turnaround time for this conversion is generally a few days and usually there is no paperwork involved since the property's documents are already with the when transferring home loan to another bank and converting it into EBLR can mean incurring a cost of 0.5% to 1% of the loan says transferring your loan to a new bank makes sense where there's a substantial discount in interest rates being offered along with other benefits like easier pre-payment terms.'The cost of a transfer is usually 0.5-1% of the loan. The costs include processing fee, legal fees, MOD charges, and pre-EMI interest on the new loan, and pre-closure costs (such as simple interest or pre-closure fees) on the old loan. You will easily recover the costs in a year if the rate difference is substantial. The Turnaround time is typically a fortnight, but may get lengthier if the bank insists on additional scrutiny,' says Shetty.
