Home Loan Interest Rates of SBI Falls to 8%

Most people have the desire to build their own dream homes. But the rapidly rising costs of real-estates act as a barrier to their dreams. But the availability of home loans with flexible EMI options and attractive interest rates are emerging as a solution to fulfill the dreams of people. When it comes to home loans, SBI property loan is a top choice among people.

SBI offers home loans to individuals who desire to buy their own house or extend or renovate their already existing house. The complete transparency and trustworthiness of the SBI home loans are among the top factors for its growing demand. The interest rate of housing finance from SBI depends on various factors, including the salary of the borrower, type of loan, loan amount, as well as the fact that whether the person is an existing bank customer or not. 

Some of the significant benefits that the home loans offer include:

1. High Repayment Tenure

Among all other types of loans offered by the banks, a home loan has the longest tenure of repayment. The repayment tenure can be extended up to 30 years. With the increase in the tenure, the burden of monthly tenure also reduces. 

2. Tax Benefits

The tax deduction offered on the principal amount and interest of home loans encourages more people to buy their dream home. With the enhanced tax benefits, building the dream home becomes easier.

3. No Prepayment Charges

In the case of other loans, prepayment charges are applicable for the borrowers. But, in the case of home loans, there are no such penalties. It offers you the liberty to utilize your surplus money whenever possible and lower the burden of home loans. 

4. Easy to Buy Home

The high real estate costs are making it more difficult for people to buy their dream home. With easy monthly installments of the home loans, buying your dream house becomes easier.

5. Capital Appreciation

Availing the home loans and buying your dream house not only prevent you from the strain of living in a rented house and paying rents but buy also enables you to enjoy capital appreciation. As the value of your property increases over time, you can enjoy more benefits. 

The SBI interest rates for home loans are the most attractive in the current market scenario. For this reason, the State Bank of India stands as the largest lender in India. With the aim of bringing down the borrowing cost for the property seekers, SBI has reduced its lending rates by five basis points.

The reduction in the marginal cost of funds based lending rates on November 8, 2019, brought down the SBI home loan interest rate to 8%. Following the announcement of the reduction in repo rate of the Reserve Bank of India by 25 basis points, SBI announced a cut on home loan interest rates up to Rs 30 lakhs. 

With the highest share of the home loan market, SBI empowers the lower as well as the middle-class segment by lowering the interest rates. The reduced SBI housing loan interest rate became effective from November 10, 2019. This reduction is the seventh time that SBI has reduced the interest rate of home loans in this fiscal year. The reduction is aimed at benefitting the customers of all segments who are looking for home loans from SBI. However, the revised interest rates are not applicable to the SBI home loans that are linked with the repo rate. 

Apart from SBI, HDFC has also announced a reduction of 10 basis points in the month of October that led to the reduction of the loan prices. This brought down the lending rate to 8.25% and 8.65%. 

Transmission of Benefits

The cut down of repo rates by the central bank led to the substantial reduction of interest rates by the different banks. Since the month of July 2019, a number of banks have started lowering their interest rates on the automobile as well as home loans. The reduction in the interest rates is aimed at passing on the benefits of rate cut downs by the banking regulator of the country to the customers of the different banks.

Among the lenders who have reduced their MCLR in the past include the Central Bank of India, Punjab National Bank, and ICICI Bank. Currently, the reduced repo rate of the Reserve Bank of India is 8.15 percent. Owning to the benefits SBI has received from RBI, the SBI home loan interests are reduced to offer the property seekers with significant benefits. 

The Impact of Reduced MCLR on Borrowers

MCLR refers to the Marginal Cost of Funds based Lending Rates. It is considered at the interest rate at which the different commercial banks offer home loans to the customers. It is the benchmark rate below which the banks cannot afford to lend funds or loans to their customers. The MCLR varies from bank to bank. As MCLR is directly associated with the repo rate of RBI, any changes in the repo rate have a direct impact on the MCLR rates of the different banks. 

The introduction of MCLR aimed at ensuring an interest rate that is fair for both the banks as well as the borrowers. It also enhances the transparency rates by allowing the determination of the interest rates in advance. MCLR, as the new benchmark lending rate emerged on April 1, 2018, and replaced the old base rate system.

Owing to the slow transmission of the MCLR policy, the Reserve Bank of India has directed all the banks to switch to an external benchmark lending system. A reduction in the MCLR of SBI will lower the home loan interest rates for the customers, making it easier for them to buy their dream homes. 

Along with the reduction in interest rate, the tenure of loan repayment gets slightly shortened for the existing borrowers of SBI. The customers having home loans linked to the MCLR rates have to approach the banks and readjust the rates. During the implementation of the rate cuts, the repayment tenure gets adjusted but not the monthly payment amounts. With the low SBI current home loan interest rate, homebuyers can avail their dream homes more easily.