House-Hunting? Public Banks Lead the Pack with Lowest Home Loan Rates Post-RBI Slash!

The Reserve Bank of India’s recent 50 basis point (bps) repo rate cut—bringing the benchmark down to 5.5%—has triggered a wave of home loan interest rate reductions, especially among public sector banks. This move, part of a cumulative 100 bps cut since February 2025, is aimed at making credit cheaper and reviving housing demand.

 

Key Highlights:

 

Major public sector banks, including Punjab National Bank, Canara Bank, Union Bank, Indian Overseas Bank, and Bank of Baroda, have swiftly reduced their Repo Linked Lending Rates (RLLR), with many now offering floating home loan rates below 8% for eligible borrowers.

 

The lowest public sector rates are now as low as 7.80% (Canara Bank), 7.85% (Bank of Maharashtra, Central Bank of India, Union Bank), and 7.90% (Indian Bank, Indian Overseas Bank). The State Bank of India and others are at 8% or slightly above for most new borrowers.

 

Private sector banks, by contrast, are lagging in passing on the full benefit. Their rates remain higher, typically starting from 8.45% (HDFC Bank) and 8.50% (ICICI Bank), with few exceptions such as Bajaj Housing Finance at 7.99%.

 

The EMI reduction is substantial: For a ₹50 lakh loan over 20 years, monthly savings can exceed ₹1,500 after the rate cut, making home ownership more affordable.

 

Existing borrowers on repo-linked loans will see the fastest benefit, while those on older benchmarks (MCLR/Base Rate) may face delays.

 

The RBI’s neutral policy stance suggests further cuts are unlikely soon, making this a timely opportunity for new homebuyers.

 

Bottom Line:

Public sector banks are currently offering the cheapest home loans in the market, with rates dipping below 8% for many borrowers. Private banks remain costlier, making PSU banks the preferred choice for affordable home financing after the latest RBI repo rate cut.

 

Source: Economic Times, Hindustan Times, Moneycontrol, Paisabazaar, Outlook Money