Originally Posted by mishthi

State-owned Union Bank of India has taken the lead in reducing both fixed and floating rates by 50 basis points for housing loans below Rs 20 lakh.The cut in interest rates will be applicable for fresh loans, effective May 7.

Effectively, the bank has now the cheapest housing rates for the under-Rs 20 lakh loan segment. After the cut, for up to five years, the bank's fixed rate and floating rate are pegged at 10.75% and 10%, respectively. The rates are the same for loans above 15 years as well.

The rate cut follows the Reserve Bank of India’s (RBI) recent policy announcement reducing the risk weighting on housing loans up to Rs 20 lakh by 50%. The RBI also recently included housing loans below Rs 20 lakh as a part of priority sector loans.

Almost 85% of home loans of the banking industry fall in the under-Rs 20 lakh category.