The repo cut by RBI may give a reason to cheer for people who are planning to buy their dream home in this festive season.

State-run, Union Bank of India (UBI) has reduced its home loan rates by 50 basis points immediately after the Central Bank cut its short term lending rate (repo) by 100 basis points.

The interest rates have been slashed down to 11% for home loans upto Rs 30 lakh. However rates for amount above Rs 30 lakh will only get a waiver of 25 basis points and that too as a part of festive offer.

Union Bank is the first to cut interest rate after the announcement of repo cut. Punjab National Bank had earlier cut its home loan rates after the CRR cut.

Now most banks are expected to cut their lending rates after a 2.5% cut in CRR and 1% cut in repo rate. Yes Bank chief, Rana Kapoor says that interest rates could witness a (downward) correction in the next one month.

"I expect an one percent fall in Q3 FY 09 and a further 1-1.5 percent cut in Q4 this fiscal," said Kapoor.

The new interest rates of UBI are effective from October 21st.