Before the RBI introduced MCLR - Marginal Cost funds based Lending Rate, home loan subscribers had to borrow as per the base rate. One of the primary differences between the two lending rates was the interest rate. Base rate, at any given point of time, was expensive for the end-customer compared to MCLR. As of now, the MCLR rate for home loan starts from 8.20% per annum compared to base rate of 9.05% per annum base rate.
Secondly, marginal costs are charged on the basis of interest rates for various types of deposits, borrowings and return in net worth, it becomes sensitive to policy changes. On the other hand, in base rate the lender calculates the average cost of lending to decide the applicable interest rate. In short, if you are subscribed to a MCLR based housing loan, the rates of your loan would go down or up with every policy revision. On the other hand, if you are subscribed to base rate housing loan, you would continue paying the same EMI throughout, even if the housing loan rates are real down.
Hence, if you are subscribed to a base rate loan, it would be conducive to switch your home loan to an MCLR based loan. This will instantly reduce your interest burden and your EMI will go down eventually. That said, consider certain factors such as (1) cost of switch, (2) potential profits etc. before availing a home loan balance transfer.