After having posted slower growth than its peers for the past few quarters, Bank of Baroda has reduced its home loan interest rates by 25 basis points to 6.50% for a limited period.

The state-run bank was forced to lower this special rate after it came under refinancing pressure. Many of Bank of Baroda’s home loan portfolio got refinanced by other banks at lower rates of interest.

Bank of Baroda’s move is against the tide and was unexpected as it recently raised the marginal cost of funds-based lending rate (MCLR). The bank had hiked the MCLR by 0.05%, effective 12 April.

Bank of Baroda was basing its home loan sanctions on the credit scores for long, resulting in many loans moving out to competitors.

“We have seen retail grow well, at about 11% organically. Within that, home loans have been relatively slow because of the refinancing pressure which was there on our book. So, disbursements were happening, but there was a lot of refinance which was also happening and we have been lending based upon credit scores for a long time. So, the quality of portfolio is good and therefore bore the brunt of the refinancing pressure, which should dissipate now, now that the interest rates are starting to normalise,” Bank of Baroda managing director and CEO Sanjiv Chadha had told analysts in February after announcing the third quarter results.

The bank had home loans of Rs 76,898 crore growing at 6.57% over the previous year at the end of the third quarter ended 31 December, 2021.

The new rate beginning at 6.50% per annum is available for customers applying for fresh home loans as well as for balance transfers. This special rate is available across all loans amounts and is linked to a borrower’s credit profile.

Bank of Baroda also announced a 100% waiver on processing fees during this limited period until 30 June.

“We have seen a significant pick-up in home sales over the last many months and we are delighted to extend the good times for homebuyers with the introduction of a special, limited period interest rate offer of 6.50% along with nil processing charges. We expect the momentum to continue, as customers seek to make the most of this very attractive offer to buy their dream home,” said Bank of Baroda general manager of mortgages and other retail assets H T Solanki.