As of July 2025, interest rates on new floating rate home loans in India have dropped below the 7.5 percent mark, following a cumulative 100 bps repo rate cut by the Reserve Bank of India since February. This shift marks a notable easing of credit costs for new borrowers and sends encouraging signals to the housing market.
Public Sector Banks Lead with Competitive Rates
Several public sector banks now offer home loans starting at 7.35 percent per annum:
- Bank of India, Bank of Maharashtra, Indian Overseas Bank, and Central Bank of India all list starting rates of 7.35% p.a.
- Union Bank of India also stands at 7.35%, with possible concessions, and Canara Bank offers around 7.40%.
Meanwhile, Bank of Baroda and Punjab National Bank follow closely at 7.45%–7.50% range.
SBI and Other PSBs Introduce MCLR Reductions
- State Bank of India has cut its MCLR by up to 25bps, effective July 15, 2025, bringing home loan lending rates into the 7.95%–8.90% range for existing floating rate borrowers.
- Bank of Baroda and Canara Bank also announced 5bps reductions in their MCLR, expected to gradually lower EMIs for existing floating-rate customers.
Private Sector Banks Still Higher
Private banks have yet to follow suit with similar aggressive cuts:
- HDFC Bank’s home loans now start around 7.90%.
- ICICI Bank offers floating or fixed rate loans beginning at 7.70%, though many standard offers remain between 8.75%–9.40% depending on credit score and amount.
Repo Rate Cut Drives Improved Transmission
The RBI’s repo rate reduction of 50 basis points on June 6, 2025, following earlier cuts in February and April, has cumulatively pared 100 basis point bringing the repo rate down to around 5.5%. As most floating loans post?October 2019 are linked to external benchmarks typically the repo rate. The full benefit is now flowing through to borrowers.
What This Means for Borrowers
- For a Rs 50 lakh loan over 20 years, borrowers can expect EMIs between approximately Rs 39,700 and Rs 40,300 with rates near 7.35%–7.50%, compared with Rs 41,500 when rates were close to 7.90%.
- Eligible borrowers with strong credit may secure preferential starting rates around 7.25% at select PSBs. Union Bank of India offers 7.25% plus minor discounts for green home registrations or insurance tie?ups.
National Industry Demands: Lower to 6%?
Housing lobby NAREDCO has urged banks to target home loan rates of around 6% to revive India’s housing demand, highlighting that even current sub 8% levels may not be enough to significantly accelerate new purchases.
Takeaway for Borrowers
- New floating-rate home loan customers should compare offers from public sector banks, many now begin at 7.35%–7.50%.
- Existing borrowers may benefit from ongoing MCLR cuts at SBI, BoB, and Canara, potentially lowering EMIs in the coming months.
- Private banks still carry higher rates; consider refinancing or switching if your current rate exceeds 7.9%.
- Your credit score, employer profile, loan amount, and loan tenure remain key factors in final rate determination.
Despite aggressively easing monetary policy, full retail transmission across all lenders is yet to complete. But for many homebuyers, especially first time borrowers or those refinancing, this interest rate landscape represents the best window for affordable borrowing in over three years.
