SBI links home loan interest rates to the repo rate
The State Bank of India is one of the largest banks in the country. It offers a wide range of banking solutions to individuals as well as to corporates. The bank also offers attractive loans at affordable interest rates.
SBI Home Loan is a popular product offered by the bank. It comes in many variants that are suitable for all types of housing-related needs that you might have. Recently, SBI has made home loans more affordable to borrowers by linking the home loan interest rates to the repo rate linked home loan. Do you know what that would mean for you?
SBI Home Loans and Repo rate
Home loans are now increasingly being offered on the MCLR based interest rates. MCLR means the Marginal Cost of Lending Rate. It is sensitive to changes in the repo rate made by the Reserve Bank of India from time to time. Since home loans are linked to MCLR of banks, any change in the repo rate changes the MCLR which, in turn, changes the interest rate of home loans.
Thus, with recent rate cuts undertaken by the RBI, the repo rates have also reduced. As such, the MCLR of most banks has also come down. This rate cut should ideally result in a decrease in the home loan interest rates too for borrowers who have availed the floating interest rate home loans.
However, the RBI reduced the repo rates, banks did not transfer the rate cuts to their borrowers immediately. So, even though the MCLR was supposed to offer the benefits of the repo rate cuts to home loan borrowers, the same did not happen immediately. Thus, home loan borrowers incurred higher home loan interest rates, even though the repo rates were lowered.
SBI’s unique proposition
The SBI, therefore, has come up with a home loan whose interest rate is directly linked to the repo rate. This loan scheme would provide an instant reduction in the home loan interest rates if the repo rate is reduced by the RBI.
The most important features of this home loan are as follows –
- You should have a minimum annual income of INR 6 lakhs to apply for this loan
- The rate of interest is calculated by adding up the repo rate, base spread, and additional spread. These rates are 5.75%, 2.25% and 0.40% respectively bringing the home loan interest rate to 8.40% per annum. This rate is lower than the MCLR based home loan interest rate of 8.55%.
- The repayment tenure under these loans is up to 33 years. It can also stretch to 35 years if the property is under construction. MCLR loans, on the other hand, allow repayment tenures of only up to 30 years. This makes repo rate home loans all the more affordable for borrowers.
- A minimum of 3% of the principal amount should be repaid every year under the loan
- If you have an existing floating rate home loan with SBI Bank, you can switch. Your home loan linked to the bank’s MCLR would then be linked to the repo rate.
So, a repo rate linked home loan offered by SBI Bank is a good alternative to other conventional home loans that you need. The loan would provide you with lower interests, and the rate changes would be passed on to you immediately. So, if you have an existing home loan or you are looking for a home loan, choose SBI’s repo rate home loans. You would get good benefits and save on interest costs.