The RBI went for a surprise policy rate cut ahead of its monetary policy meet on February 3, 2015. The smart move brought a sigh of relief to the existing and prospective home loan customers who have been paying a high-interest rate between 10.5 and 12 percent on their home loan. While a 25 basis point slash in the repo rate by RBI is yet to be followed by a cut in base rate by most of the banks, the rate cut news has raised the anticipation that the economy is set to move towards low-interest rate policies, and that will be a gain for the home loan customers.

Avoid fixed rate loans

Fixed rate loans are the loans that are not affected by the market moves and so the customer has to pay a fixed EMI every month irrespective of the base rates of the Bank. According to market experts, the base rate of banks is expected to slide down by around 100 bps this year so paying more EMI on home loans will not prove prudent.

Although ICICI Bank offered special fixed rate loans to their customers till December 31, 2014, HDFC Limited launched its fixed scheme last month that is available till January 31, 2015, where it is offering loan to home buyers at fixed rates for a certain period at interest rates that are close to the floating rates. Within its scheme, HDFC is offering an interest rate between 10.15 and 10.35 per cent for two and three years and an interest rate of 10.25 to 10.5 percent for the 10-year option.