MUMBAI: Union Bank of India on Tuesday announced a reduction in its home loan interest rates, which will now start from 6.4% — the lowest rate in the industry. The reduced rate will be effective from October 27. The new rates will apply to customers applying for fresh loans or those who wish to transfer their existing loans including balance transfers. This is the lowest home loan rate offered by a mainstream bank ever. “We are offering 6.4% for the best category of customers with credit scores of over 800. The low-cost deposits are providing us a cushion enabling us to cut rates even further,” said Rajkiran Rai, MD & CEO, Union Bank of India. He added that the bank was working with thin margins as defaults among top-rated customers is unlikely and also the RBI assigns a lower risk-weightage to home loans, which enables banks to lend more with less capital. “Home loans have become extremely competitive, it is not just about rates. We have partnered most of the big builders for a fast turnaround of loans. We have introduced several channels for lead generating including the website and missed call banking,” said Rai. As home loans are now linked to the RBI’s repo rate, customers do not run the risk of sharp sudden increase in rates. The RBI has also allowed banks to elongate the tenure instead of hiking EMIs should its repo rate rise. Even as bond yields have started hardening, the festive season has seen a home loan rate war among banks. With credit growth this year at an anaemic 7% so far, banks are looking at growing their portfolio by pushing home loans, which are seen as low-risk advances.