Home Loan Rates hike recorded in SBI.
Effective from the 15th of June, the biggest leader SBI- State Bank of India has raised its rate of interest (ROI) for home loans by 50bps (where 100bps = 1 percentage point) to 7.55% from 7.05%. This is the second time that the key rate of interest has been raised since May 2022. Axis bank has also increased its lending rates and is now offering loans to its customers maintaining a credit score of 800+ at 7.6%. Also, HDFC which is India’s largest housing finance company has also hiked its home loan rate of interest by 50bps to 7.55%. For example, the lending rate rises up as the credit score of the borrower drops below 800 which is nothing but a credit risk premium. For a person with a credit score between 799-750, the ROI would be 7.65% and for someone with a credit score between 749-700, it would be 7.75%. Also, new customers of the banks with no credit history would not get loans below a 7.75% rate of interest.
As per the new reforms, the Reserve Bank of India has come up with a new methodology according to which the commercial banks set their lending rates under the name Marginal Cost of Funds based Lending Rate (MCLR). This system replaced the base rate system with effect from 1 April 2016. Considering the repo rate and other borrowing rates, MCLR is revised monthly. Explicitly the repo rate and other borrowing rates were not specifically viewed under the base rate framework. The Base Rate is the loaning rate determined in light of the all-out cost of assets of the banks and is the base loan fee at which a bank can loan with the exception of credits to its own workers, its resigned representatives and against the bank's own deposits.
Credit: Home Loans Interest Rates (Current) - Interest Rates (sbi.co.in)
The Mean Rate of Interest for Home Loans as mentioned on the SBI website is 7.37%.
External benchmark implies banks following an interest rate anchor set by an independent entity that is outside the bank. For example, RBI's repo rate or FBIL's MIBOR rate are external benchmarks. In 2019, the RBI (Reserve Bank of India) instructed banks to follow external benchmarks for setting their floating rates.
This month as stated above, an increase of 40 basis points, to 7.05%, to External Benchmark Lending Rate (EBLR), and changed the Repo-Linked Lending Rate (RLLR) to 6.65% plus Credit Risk Premium (CRP). MCLR (Marginal Cost of Funds-based Lending Rate) of the bank has been increased by 20 basis points effective June 15.
|
BANK NAME |
RLLR |
Minimum Interest rate (%) |
Maximum Interest rate |
|
Bank of Maharashtra |
7.2% |
6.8% |
8.2% |
|
Bank of Baroda |
6.9% |
6.9% |
8.25% |
|
Union Bank of India |
7.2% |
6.9% |
8.6% |
|
Punjab & Sind Bank |
6.6% |
6.9% |
7.75% |
|
Bank of India |
7.25% |
6.9% |
8.6% |
Interest rates as on June 9, 2022 Source: Compiled by ETIG
Ultimately as per the new reforms, make sure you have a good credit score before you apply for any loan for the rate of interest to be low.
