what is the interest rate on home loans?
three different lenders. three different rates. bank of Maharashtra and Central Bank of India are offering 7.00% right now. HDFC is at 7.75%. LIC housing finance is at 9.60% for someone with a credit score below 600. all correct as of july 2026. all for the same product.
so what is the actual rate? there is no single answer. it shifts with the borrower, the bank, the loan size, and the property itself.
the repo rate is the floor
the Reserve Bank of India (RBI) sets the repo rate. that is what it charges banks for lending them money. right now it is 6.00%.
banks then add a spread on top. this spread covers their costs, their profit, and the risk of lending to that specific borrower. a salaried professional with a 780 credit score and a ₹50 lakh loan gets a thin spread. a self-employed borrower with a 680 score gets a thicker one. same bank. same month. different numbers on the sanction letter.
where the public sector banks are
bank of Maharashtra and Central Bank of India are at 7.00% for loans above ₹30 lakh. Bank of India is at 7.10%. Indian bank is at 7.15%. SBI is at 7.25%.
private banks sit a step behind: South Indian Bank at 7.25%, Federal Bank at 7.35%, HSBC at 7.45%, ICICI at 7.50% and HDFC at 7.75%.
LIC housing finance has a wider range. 7.50% for credit scores above 800. 9.60% for scores below 600. that 2.10 percentage point gap adds roughly ₹12 lakh in extra interest on a ₹50 lakh loan over 20 years.
the credit score lever
this is the one factor the borrower controls directly. a score above 750 gets the lowest rate. between 700 and 750, the rate creeps up. below 700, the spread widens. below 650, some lenders say no.
the pricing is not arbitrary. the credit score predicts the likelihood of default, so a lower score carries higher risk and attracts a higher rate.
loan amount matters
public sector banks reserve their lowest rates for loans above ₹30 lakh. a ₹25 lakh loan might get 7.25%. a ₹35 lakh loan from the same bank gets 7.00%. the difference is the interest income. larger loans generate more of it, so the bank can afford a thinner spread.
this is not a secret. but the borrower has to ask or check the rate sheet.
the down payment effect
the loan-to-value (LTV) ratio is the loan amount divided by the property value. put down 30% and the LTV is 70%. put down 10% and the LTV is 90%. the lower LTV gets the better rate.
more equity means the borrower has more to lose. default becomes less likely. the bank also has more cushion if it has to sell. most banks allow up to 90% LTV for loans up to ₹30 lakh, but the best rates go to LTV below 75%.
salaried vs self-employed
salaried applicants get better rates. verification is straightforward. bank statements and income tax returns tell the story. self-employed applicants have more complex income structures. banks take longer to verify and charge a slightly higher rate.
the gap has narrowed but it still exists. a self-employed borrower with a 780 score might get 7.50% while a salaried borrower with the same score gets 7.25%.
floating vs fixed
floating rates move with the repo rate. when the RBI changes the rate, the equated monthly instalment (EMI) changes. the starting rate is lower. most floating loans have no prepayment charges.
fixed rates stay the same for 1 to 5 years. the EMI is predictable. but the rate is 0.5% to 1% higher. prepayment charges apply, usually 2% to 5%.
most borrowers choose floating. the lower starting rate and no prepayment charges make it the better option for most.
the other costs
the interest rate is the biggest cost but not the only one.
processing fee. 0.25% to 1% of the loan amount. on ₹50 lakh, a 0.5% fee is ₹25,000. some public sector banks charge 0.25% with a cap.
GST applies at 18% on the processing fee, adding ₹4,500 to a ₹25,000 fee.
prepayment charges. floating loans do not have these. fixed loans do.
legal and valuation fees. ₹5,000 to ₹15,000. depends on the lender and property.
what 1% does
a 1% higher rate on a ₹50 lakh loan over 20 years adds about ₹5.5 lakh in extra interest. the amortisation calculation produces that number.
a 0.25% difference adds roughly ₹1.4 lakh. this is why comparing rates matters.
negotiating works
banks negotiate. existing customers with a clean record have leverage. a written offer from a competitor gives the bank a reason to match. high credit score and stable income improve the position.
the borrower should ask. many do not, and the bank keeps the spread where it is.
the advertised rate trap
banks advertise their lowest rate, which is reserved for the most favourable profile: a high credit score, a large loan amount, a low loan to value ratio, and salaried employment.
anyone missing any of these gets a higher rate. the advertised number is a starting point, not a guarantee.
getting the actual rate requires a formal application. this triggers a hard enquiry. a hard enquiry costs 5 to 10 points on the credit score. a soft check does not. many lenders do not clearly distinguish between the two. the borrower should confirm which one the lender is running.
frequently asked questions
- what is the current repo rate and how does it affect home loan rates?
the repo rate is the rate at which the RBI lends to banks. when the repo rate changes, banks adjust their lending rates. as of july 2026, the repo rate stands at 6.00%.
- which bank offers the lowest home loan interest rate?
bank of Maharashtra and Central Bank of India offer the lowest starting rates at 7.00% for loans above ₹30 lakh. SBI and South Indian Bank also offer competitive rates starting at 7.25%.
- how much difference does a 1% rate change make on a home loan?
a 1% difference on a ₹50 lakh loan over 20 years adds about ₹5.5 lakh in extra interest. the exact amount depends on the loan amount and tenure.
- can the interest rate be negotiated with the bank?
existing customers with a good repayment record may get a better rate. banks may also match offers from competitors. a high credit score and stable income improve the chances of getting a lower rate.
- what is the tax benefit on home loan interest?
under section 24(b), interest paid on a home loan for a self-occupied property is deductible up to ₹2,00,000 per year under the old tax regime.
