Will interest rates go down from here?

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26 Aug, 2025 12:21

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Rajiv Raj Creditvidya.comIt was a complete volte-face from Reserve Bank of India’s Governor this week. While most were preparing for another rate hike from Reserve Bank of India, the Governor decided against it and kept key policy interest rates unchanged. Interestingly, in just a couple of days, the largest public sector bank - State Bank of India and the largest non banking home finance company - Housing Development Finance Corporation (HDFC), announced a cut in interest rates on home loan.

The quantum of cut may be just 20-25 basis points from both HDFC and SBI, but must not be overlooked. Rather it should be taken seriously. Both RBI and the lenders are giving an important signal now. The economy is at a crossroad. Inflation is staring in the face and growth is fast dwindling. Though RBI has so far chosen to deal with inflation, this time, it has given some patient hearing to the plea of pushing the economy on the growth path. Also the decision of RBI came just one day before Federal Open Market Committee (FOMC) decided to taper the quantitative easing by USD 10 billion each month. This means that it is the time to recognise that economic growth is the priority for India’s central bank. Especially, at a time when the liquidity in the economy is expected to go down as money goes back to developed markets such as the US.

Lenders too have taken the right clues. As RBI has taken a brief pause in its hawkish stance, housing finance companies have also brought down the lending rates. It is widely expected that other public sector banks would follow soon as the government is keen to revive the economic growth ahead of elections in early next year. SBI has not only cut the interest rate on home loan but also expanded the low interest rate slab to Rs 75 lakh from earlier Rs 30 lakh and further gave a lower interest rates by 5 basis points to women home loan borrowers. HDFC is quick to follow SBI. HDFC has also lowered interest rate and termed it as winter bonanza. It has kept lower interest rate scheme offer open till January 31, 2014. If RBI sticks to its aggressive stand with growth as the priority, HDFC lower interest rate scheme would not remain a limited scheme and become the card interest rate the lender will be offering. This provides strong opportunity for existing and new home loan borrowers to act with some agility. In CY2014, the interest rates may go down gradually, but for home loan borrowers it is important to be agog for developments related to lower interest rates.

Given these realities, banks, which are under pressure due to rising non-performing assets, would be considering giving loans to only creditworthy applicants. For you to ascertain if you are creditworthy is to secure your credit report. Banks insist on CIBIL score of more than 750 while offering home loans. Hence, it is important for you to ensure that your credit score is in place if you have plans to buy a house with the help of borrowed money. If you are an existing home loan borrower keep repaying your home loan on time. This ensures that your CIBIL credit report score remains in good shape. If the bank from which you have taken home loan does not reduce interest rates, you may choose to shift your home loan to some other lender.

So, opportunities are abound. However, to make the most of these opportunities you require discipline in repaying your credit. Also alertness in tracing news related to interest rates would only save you money.