LIC Housing Finance (LICHFL) has announced a reduction in its home loan interest rates, setting the floor at 7.15%, effective December 22, 2025. This move positions LICHFL as a frontrunner in offering competitive rates, even when compared to the State Bank of India (SBI). The reduction in rates is expected to boost homebuyer sentiment and make homeownership more accessible.
The new rate of 7.15% is available to new home loan applicants. This decision follows the Reserve Bank of India's (RBI) recent cut of 25 basis points in the repo rate. The Monetary Policy Committee's (MPC) decision to reduce the repo rate has seemingly paved the way for financial institutions to offer more attractive lending rates.
Tribhuwan Adhikari, MD & CEO of LIC Housing Finance, stated that the RBI's cumulative repo rate cuts this year have provided relief to homebuyers. He anticipates that this new rate will instill confidence among first-time purchasers and set a positive tone for demand as the market looks ahead to 2026.
While LICHFL's rate starts at 7.15%, the ultimate interest rate offered to a borrower depends on their CIBIL score. Borrowers with higher credit scores, typically 825 and above, are more likely to qualify for the lowest rates. SBI's starting rate for standard home loans is marginally higher, at 7.25%.
It's important for prospective homebuyers to consider various factors beyond just the initial interest rate. These factors include processing fees, loan tenure, and the loan amount. SBI, for instance, charges 0.35% of the loan amount as processing fees, while LICHFL charges around 0.25%. These fees, along with other charges, can impact the overall cost of the loan.
Both LICHFL and SBI offer loans up to ₹5 crore with repayment tenures of up to 30 years. However, SBI typically funds up to 90% for loans below ₹30 lakh, whereas LICHFL covers around 80% for properties worth ₹30-75 lakh. This difference in loan-to-value ratios can influence a borrower's decision based on their budget and property value.
Several other banks are also in the mix with competitive rates. Currently, Bank of India, Bank of Maharashtra, and Central Bank of India are offering home loan interest rates starting from 7.10%. The specific interest rate provided is based on factors such as the applicant's credit score, loan amount, occupation, and employer profile.
For borrowers considering fixed-rate home loans, where the interest rate remains constant throughout the loan tenure, it is generally advisable to apply when current rates are low and expected to increase in the future.
This competitive landscape benefits homebuyers, providing them with more options and potentially lower monthly payments. It remains crucial for individuals to compare offers from multiple lenders, maintain a high credit score, and keep their EMI/NMI ratio low to secure the most favorable home loan terms.
