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Bank of Maharashtra Cuts Home Loan Interest Rate to 8.35%. Best Time For Home Loan

Mumbai, January 5, 2024, in a New Year bonanza, public sector lender Bank of Maharashtra (BOM) has reduced interest rates on home loans by 15 basis points to 8.35%. This makes BOM home loans one of the most affordable in the banking sector currently.

Announcing the rate cut, BOM said it aims to make retail loans more affordable for customers in the high-interest rate environment. The state-owned bank has also removed processing fees on home loans under its ‘New Year Dhamaka Offer’.

We have taken this step to bring more happiness to customers in the new year by making home loans cheaper. With the prevailing high-interest rate scenario, our bank is making an effort to support retail loan customers with affordable pricing,” the Pune-headquartered lender said in a statement.

The 15 basis points or 0.15% cut on home loan rates is applicable on both new loans and existing ones. Apart from home loans, BOM has also removed processing charges on car loans and gold loans till March 31, 2024. This limited-period offer can help attract more retail borrowers to the bank.

BOM’s Interest Rates on Home Loans

Loan Amount Interest Rate

  • Up to ₹30 lakh 8.35%
  • Above ₹30 lakh 8.85%

BOM had last decreased its MCLR or marginal cost of funds-based lending rate in December 2022 by 5-10 basis points across different holdings. The current 1-year MCLR stands at 8%, on which the bank standardises most of its loans.

The lender has reported strong growth in the October-December 2022 quarter, with overall business rising 18.92% year-on-year to ₹4.34 lakh crore. Deposits grew 17.9% to ₹2.46 lakh crore and advances were up 20.3% at ₹1.89 lakh crore.

Retail Loans Gain Prominence

With slowing corporate credit growth, banks are focusing more on the retail segment which includes home, auto and personal loans. While corporate loan growth was just 9.3% for BOM, retail loans increased faster at 20.7% in the third quarter of FY24.

Other main public sector banks including SBI, PNB, and Canara Bank have also cut their benchmark lending rates in recent months. This follows the RBI hiking the repo rate by 225 basis points since May 2022 to tame high inflation. Banks have passed the burden of increased funding costs on to borrowers.

Outlook for Interest Rates

With retail inflation easing, the RBI may hit a pause on rate hikes going ahead. The central bank is forecast to increase rates by just 25 basis points in February 2023 to 6.5%, before shifting to a neutral stance. This could nudge banks to reduce lending and deposit rates gradually later this year.

Home loan borrowers can benefit from moderation in interest rates after the sharp surge seen in 2022. Competition among banks to attract more retail customers will also help keep home loan rates affordable. BOM’s updated rates make it among the most competitive in the market currently.

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