How Does the Lowest Ever Interest Rate Push the Demand for Home Loans?

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In its recent monetary policy Home Loans, the RBI has not altered the policy rates. Hence, home loans continue to remain affordable, as lenders will not increase these rates by a significant margin. This move to reduce the policy rates and not alter it has left a positive effect on the demand for housing loans as well. A recent report suggests that financial institutions across the country has registered a growth in this segment of 6% to 14%.

How lowest ever interest rate influence buyers to opt for home loans?

The lowest home loan interest rate, which in some cases are sub-7% has helped prospective and current housing loan borrowers significantly. Owing to this, the total cost of a loan went down, and now individuals need to pay less for the same loan amount, than what they used to previously.

Resultantly, the demand for housing credits has increased significantly, as reflected by the data mentioned above.

Experts say this affordability increases because of certain factors like the price of the home, level of income and home loan rates. However, there are several other external reasons to opt for a home loan other than the lowest interest rate.

Reasons to go for a housing loan

  • Longer repayment tenor

The repayment tenor of housing credit can go as high as 30 years. Resultantly, the EMI payable here remains affordable, and allow borrowers to close their loan without any difficulties. Individuals can take assistance of a home loan EMI calculator to find a loan tenor as per their repayment capacity.

  • Comparatively easy eligibility

The eligibility parameters of housing credit are comparatively easy. It is primarily due to the fact that it is a secured loan. Nonetheless, salaried and self-employed individuals with a healthy CIBIL score can easily apply for this financial product. At the same time, they need to meet the monthly income criteria set by a financier.

Additionally, borrowers need to keep documents required to get a home loan handy to ease their application process.

  • Government-aided CLSS subsidy

Another reason for home loans gaining popularity is that the government provides housing loans with additional benefits such as CLSS subsidy. CLSS makes housing affordable for the middle class. Moreover, the Government of India is providing CLSS subsidies not only to the middle class but also to other layers of society such as economically weaker sections, lowest income groups, SC, ST, OBC, women and older adults.

  • Income tax benefit

Another notable reason behind selecting housing loans as a preferred mode of credit is due to its income tax benefits. Under the provisions of the income tax act, individuals can claim deductions on home loan interest and principal repayments. Additionally, they can get similar benefits on the stamp duty and registration charges levied on a property.

Apart from these, pre-approved offers available on housing credits makes the application process seamless. These offers are available on a series of secured and unsecured financial products, and borrowers can check their pre-approved offers by submitting their essential contact information.

Besides knowing the reasons for going for a home loan, one should also learn how to reduce the housing loan  interest rate levied on it.

3 Factors to reduce a housing loan interest rate 

  • Longer tenor

Individuals can choose a shorter tenor to reduce the interest rate on this financial product. However, the EMIs will increase as a result of it. Intending borrowers can thus use a home loan calculator to find an ideal tenor as per their suitability.

  • Higher down payment

One can pay a higher down payment to reduce the interest rate applicable on a housing loan. A higher down payment will reduce the total loan amount and the lending risk for financiers. Hence, they tend to offer a competitive interest rate against it. Individuals can take the help of a home loan interest rate calculator to know more.

  • Good credit score

Having a good credit score can help an individual negotiate with the lenders to reduce the interest rate further. In addition, individuals may learn the best credit score for home loans ways to and improve it to secure even better interest rates. 

Individuals intending to buy a property can seize this opportunity of the lowest interest rate on home loans. They can consider the factors mentioned above to get the required financial assistance at a reduced rate.

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