<div><em>With further rate cuts expected, EMIs are set to fall, writes<strong> Sunil Dhawan</strong></em></div><div> </div><div>HDFC Bank cut its base rate by 0.35 percent thus reducing the base rate from 9.70 per cent to 9.35. This appears to be an aggressive move by the country’s largest lender and has certainly taken the market by surprise. Only a few months back, SBI managing director and group executive for national banking B Sriram had remarked “We don't foresee any rate wars, all the lenders are competing with similar rates in similar bands.” But, it seems the race to lower the rates is catching up. Canara Bank has also cut its base rate by 10 basis points to 9.90 per cent from 10 per cent.</div><div> </div><div>With festive season nearing, SBI, ICICI and Axis bank too are expected to lower the rates. Borrowers of all kinds including corporates and retail individual stands to gain if rates fall further. The previous base rate reduction happened in June when Axis bank, SBI, ICICI and HDFC all of them cut their base rates</div><div> </div><div>SBI’s current base rate is 9.70 per cent, for ICICI its 10 per cent, while for Axis its 9.85. Such variation may not sustain longer and soon a cut may be witnessed in these institutions.</div><div> </div><div>What to do: When bank base rates fall, those holding home loan on flexible interest rates benefits as against those holding fixed home loans. Most banks have passed on the benefit of lower base rate to their home loan customers. For someone with an existing a home loan, the benefit can be availed in two ways-- either EMI’s may be reduced or the tenure may be reduced. Banks on their own typically reduce the tenure automatically and thus transfer the benefit of lowering base rate to their customers. Ask your banker, how has the adjustment been done or log on to your home loan account online to see if the benefit has been passed on to your account. </div><div> </div><div>If you wish to lower your EMI, you need to contact your banker and submit revised ECS mandate. If the existing loan is nearing completion, the impact of base rate change may not be much. Ideally, if your exiting loan is around three years old, consider switchover or lowering the tenure. </div><div> </div><div>The base rate may further witness a fall this year. If you are contemplating switchover, getting a new loan or bringing a change in your existing loan, it could be better to wait a little more. The margin to cut rates still exists and don’t be surprised to see further lowering of rates in near future.</div><div> </div>
