Similarly, for home loans between Rs 30 lakh to Rs 75 lakh, the effective interest rate is now at 7.65%, compared to 7.45% earlier.
In a surprise move when the banks are reducing lending rates, the largest lender, State Bank of India (SBI), has hiked its home loan rates effectively by 20 basis points (bps) for new borrowers by widening the spread over its repo rate linked external benchmark rate (EBR), according to the details given on its website. This move follows the Thursday’s announcement by SBI to cut its marginal cost of funds-based lending rate (MCLR) across tenors by 15 bps.
On March 27, SBI had cut external benchmark linked rates by 75 bps, following Reserve Bank of India’s (EBI) 75 bps repo rate cut announcement. After the last rate cut, external benchmark rate (EBR) of SBI stood at 7.05%.
Banks charge a premium over benchmark rates for giving home loans. The data on SBI’s website shows that EBR for the bank still remains at 7.05%, but the premium over EBR has been increased by 20 bps from May 1, 2020. The premium over EBR, which ranged from 15-50 bps across loan amount brackets prior to May 1, has been widened to 35-70 bps now.
For home loans upto Rs 30 lakh, the premium is now at 35 bps, compared to 15 bps earlier. Effectively, the home loan rate has increased to 7.4% from May 1, compared to 7.2% earlier. Similarly, for home loans between Rs 30 lakh to Rs 75 lakh, the effective interest rate is now at 7.65%, compared to 7.45% earlier. For loan amount of Rs 75 lakh and above, SBI will charge the interest rate at 7.75%, compared to 7.55% earlier. This hike will be applicable only for new borrowers.
RBI had earlier mandated banks to link floating retail loans with external benchmark rates from October 1, 2019 to ensure better transmission of policy rates and greater transparency. Most banks had picked repo rate as their external benchmark.