For the first time in over 15 years, the home loan rates have fallen below 8 per cent, the last time it did fall below 8 per cent was in 2003-04.
For the first time in over 15 years, the interest rate on home has fallen below 8 per cent. And, it may go down further, if inflation continues to be under control. Home loan from the State Bank of India (SBI) is being offered at an interest rate of 7.95 per cent on loan amounts up to Rs 30 lakh to salaried individuals. The home loan interest rate was about 7.75 per cent around 2003. At a lower interest rate, the borrower will not only pay low EMIs but also pay lesser interest on the home loan. “With the State Bank of India lowering home loan interest rates by 25 basis points affected from January 1, 2020, the home loan rates for up to Rs 30 lakh now stands at 7.95 per cent. This is possible for the first time in 15 years that home loan rates have fallen below 8 per cent. The last time it did fall below 8 per cent was in 2003-04 and it was one of the major reasons for the growth of real estate sector. Being the largest home loan provider, the SBI move may be followed suit by others,” says Vikas Wadhawan, Group CFO, Housing.com, Makaan.com & PropTiger.com
SBI EBR – External Benchmark Rate
From October 1, 2019, all banks have to link their lending rate to an external benchmark for which most banks including SBI have chosen to use RBI’s repo rate to base their home, car and other loans on. As the home loan interest rate is linked to the repo rate, such loans are called repo linked lending rate (RLLR). SBI calls it the EBR – external benchmark rate.
SBI home loan interest rate Jan 2020
The SBI home loan is available on a floating interest rate basis and is based on SBI EBR. Currently, the RBI repo rate is 5.15 per cent, while SBI has a kept a Spread of 2.65 per cent. So, effectively, the SBI EBR becomes 7.8 per cent.
However, actual lending may not be on the EBR as the bank may charge a premium depending on the loan the amount, profession, gender, down payment and the risk profile of the borrower.
SBI home loan at 7.95 per cent is available to those who are salaried and the loan amount is below Rs 30 lakh. For them, there is a premium of 15 basis points over the EBR of 7.8 per cent. Effectively, it becomes 7.95 per cent per annum. ( EBR of 7.8 per cent plus 0.15 per cent).
On home loan amount between Rs 30 lakh and Rs 75 lakh, the effective interest rate is 8.2 per cent as there is a premium of 40 basis points over the EBR of 7.8 per cent ( EBR of 7.8 per cent plus 0.40 per cent )
On home loan amount above Rs 75 lakh, the effective interest rate is 8.3 per cent as there is a premium of 50 basis points over the EBR of 7.8 per cent ( EBR of 7.8 per cent plus 0.50 per cent )
Effective January 1, 2020
Based on the profile of the borrower, the SBI home loan will be further based on the following factors:
- A premium of 0.15 per cent will be added to the rate for non-salaried borrowers.
- A premium of 0.10 per cent will be added to the rate for loan up to Rs 30 lakh if LTV ratio is more than 80 per cent and less than 90 per cent.
- A premium of 0.10 per cent will be added to the rate for borrowers who will falls under Risk Group of 4 to 6.
- For women borrowers, a concession of .05 bps will be available.
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Home loan rates 2020
But, will the home loan interest rate fall further? That will depend on several factors including the bank’s internal cost of funds. Unless deposit rates fall, the pressure on lending rates will remain. Also, with inflation falling further, RBI may have scope to cut repo rates too. “The repo rate or the rate at which RBI lends to commercial banks currently stands at 5.15 per cent as against 4.75 per cent, which is the historic low. If inflation remains within the RBI comfort zone, considering the overall economic scenario there are high chances of further reduction in repo rates and we may touch the historical low on that front. In fact, the apex bank has itself indicated an accommodative stance and we expect rates to fall further in 2020.”