Good time for home loan borrowers ahead? ICICI Bank cuts lending rates, others expected to follow

In response to the changing market conditions, ICICI Bank has recently adjusted its marginal cost-based lending rates (MCLR) for the month of June 2023. These revisions will impact the interest rates on various loans, including home loans, which are determined based on the MCLR.

The bank has made notable changes to different MCLR tenures. Notably, the one-month MCLR has been reduced from 8.50% to 8.35%, while the three-month MCLR has experienced a 15 basis point decrease, settling at 8.40%. On the other hand, the six-month and one-year MCLR rates have seen a slight increase of 5 basis points, reaching 8.75% and 8.85%, respectively.

The new interest rates are effective from today, 1 June 2023, the lender noted on its website. 

This is the first lender to announce the rate cut in MCLR. Other banks are also likely to announce interest rate cuts, soon.

According to Amit Gupta, MD, SAG Infotech, for individuals with home loans under the MCLR regime, continuing with their existing rates may prove beneficial. By doing so, they can enjoy lower Equated Monthly Installments (EMIs) over a longer period, as it will take time for their loan rates to reach levels comparable to the increased repo rate. 

“While current borrowers are forced to endure the majority of the rising interest rates, new borrowers will generally fare better since they can obtain loans with lower interest rates. The advantage that new borrowers enjoyed, however, is diminishing with each passing month,” said  Vinit Khandare, CEO and Founder, MyFundBazaar.

In the initial monetary policy review meeting of 2023-24, the Reserve Bank of India chose to maintain the repo rate, which is the primary benchmark interest rate, at 6.5 percent. This decision was taken to evaluate the consequences of the current policy rate tightening.

RBI has so far raised the repo rate, the rate at which it lends to banks, by 250 basis points cumulatively since May 2022 in the fight against inflation.

The RBI's next monetary policy committee meeting is scheduled to be held during June 6-8, 2023.