Many prospective borrowers complained that while much has been said on the prospects of interest rate cuts, it hasn’t been a reality for all home loan borrowers. Their anguish was understandable as till now the good news relating to rate cuts was only for fresh home loan borrowers. Those who have already taken a Home Loan were left to maintain their EMIs without the benefit of the interest rate fall. There is finally good news for this community too as the State Bank of India has made the first move by cutting rates even for old loans. It’s a matter of time before others followed suit. In fact, the pressure will be higher on private sector banks which have not resorted to rate cuts for some time, and with many borrowers looking at the option of switching, these banks could come up with new downward moves in rates in the coming weeks.

While the interest rate cut expectation is a thing of the past, the question is will it go back to the old levels of 7-8 percent which contributed to a property boom? Consensus is already building up for the fact that we are headed towards a low interest rate regime in the coming couple of years, in line with global trends. In the case of the domestic economy economy, the trigger for low interest rates has already happened on the deposit front with banks reducing the rate by 1-2 percent in the last few weeks. Now, the deposit rate has come down to single digit even with respect to long term deposits (on 3-5 years) and that would mean banks have access to cheaper funds. With inflation too sliding down at a rapid pace, there is hope for continuance of a cheaper rate regime


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