There have been many new amendments with the New Year; one of it being for the home buyers. Let’s see what changes it has made. After cutting its standard marginal cost of lending rate (MCLR), dropping down the interest from 9.10 to 8.6% on home loans by SBI, housing finance companies and other banks followed it. On an average, home loans are now cheaper by 40–50 basis points.
But would everyone cheer about it?
Although the lower interest seems to be a privilege for new home buyers, not all recipients will have an advantage. People who had taken a loan before April 2016 but after July 2010 are still paying EMIs dependent on their previous floating or fixed base rate method, with an interest of about 10%. Banks have been stagnant to pass the advantages of RBI rate cuts on to base rate recipients. For example, SBI has cut just 5 basis points of its base rates between April 2016 and January 2017. Such a minor cut does not make any remarkable distinction to the EMI.
Should you switch or not?
Experts advise shifting to MCLR to make the most of a dropping interest rate situation. Balwant Jain, investment and tax expert says, “You should shift from one lender to another after doing a benefit and cost evaluation for the complete term.”
Before switching, a recipient should acknowledge that the MCLR is not a sheer floating rate product but is a composite product.
So, what do you think about this new amendment in interest rates? Feel free to share your thoughts.
