Do you know few factors can affect your Home Loan rates?

A home loan is an ideal option when it comes to purchasing one’s desired property. Like any other loan application, one would need to consider all the different factors of the home loan and how it can affect one’s financial profile.

Additionally, one should also need to be aware of how these home loan rates can be affected. Factors such as the housing loan interest rates play an important role in the loan, especially since it also affects one’s ability to repay the borrowed funds. Here are some of the factors that can affect the different rates pertaining to the home loan:

Prime Lending Rate

This is perceived as a benchmark interest rate, wherein which lenders decided the home loan rates, especially the housing loan interest rates. Most lenders will offer rates which are 0.25 to 0.75% above this rate. Therefore, if the prime lending rate changes, the base rate offered by a lender will also change accordingly.

Statutory Liquidity Ratio rate

Every financial that offers credit to its customers must have some form of funds in a certain amount. This form can be in the form of cash, gold or even government bonds. This rate assists the RBI to control the lender’s credit expansion, keeping it within realistic rates.

Benchmark Prime Lending Rate

When there is any changes in the loan rates, especially housing loan interest rates, it is mostly the new customers that will benefit from a change. In very rare cases, does the current lenders benefit from this change. So what factor determines these changes? Most lenders follow a system known as the benchmark prime lending rate. This rate is a reference interest rate, this is used as a benchmark to determine this interest rate for a customer. This new interest rate is given to the customer at the discretion of the bank. Most lenders can change this rate only for loans other than the fixed interest home loan

Cash Reserve Ratio

This is the percentage of funds the lending institute must keep with the RBI on a daily basis. An increase in the CRR will result in fewer funds for the RBI. In this case, the RBI will adjust the CRR, changing the liquidity amount in the financial system. This also keeps the inflation cost low. An increase in the CRR will result in the increase in the interest rate. This will also decrease the liquidity amount in the financial system.

A combination of all these impacts will, in turn, influence the liquidity in the financial system. This, in turn, will affect these different rates which in turn, affects all the home loan rates. By being aware of these rates, one can take measures to opt for loan rates that will offer the ideal benefits as wells the best protection.