Lenders cut home loan rates to woo customers

BANKS ARE STEPPING up efforts to entice homebuyers and are cutting home loan rates by more than the Reserve Bank of India's recent 25-bps repo rate cut.

- KSHIPRA PETKAR

The latest reductions signal a clear push to stimulate demand in a competitive market, with Union Bank of India lowering home loan rates by 30 bps and LIC Housing Finance by 35 bps, indicating that lenders are willing to ease pricing to capture new borrowers.

"The market's competitive positioning is reflected in the sharper-than-repo reductions," said Vikram Singh, executive director at Urban Money. He explains that public sector lenders (PSBs) typically move more quickly on pricing because of their funding profiles while private banks take a more calibrated approach to balance growth and margins. Non-bank lenders continue to be selective given their cost of funds.

With outstanding home loan portfolios slowing to 11% in the September quarter from 13% in FY25, the aggressive pricing seen in home loans reflects a conscious trade-off, rather than improved balancesheet conditions. Stable asset quality in the housing segment has also encouraged banks to expand home loan portfolios.