After today's reduction in MCLR, the SBI home loans have become cheaper by 35 basis points since April 10, 2019.
Country’s largest lender State Bank of India (SBI) has announced the reduction in its Marginal Cost of Funds based Lending Rate (MCLR) by 15 basis points across all tenors. The SBI’s 1 Year MCLR would come down to 8.25 per cent from 8.40 per cent with effect from 10th Aug 2019. This is the fourth consecutive cut by SBI in MCLR in FY 2019-20. With today’s MCLR cut, its home loans have become cheaper by 35 bps since April 10, 2019. A lower MCLR will effectively mean a lower home loan interest rate and, thereby, a low-interest burden, keeping other factors constant.
Both the new and existing home loan borrowers will stand to benefit from this move. If a borrower has a 12-month period, the home loan ( and hence the EMI’s) will be reset at the end of 12 months. Those whose reset date is in September or in the next few months, will stand to gain in terms of lower EMIs.
Since July 1 2019, SBI is offering a Repo Linked Home Loan Product and after today’s cut in the repo rate, SBI’s effective Repo Linked Lending Rate (RLLR) for CC/ OD account holders will stand revised to 7.65 per cent effective 01.09.2019. SBI in its statement has said that it has affected the full transmission of Repo rate cuts by RBI and has passed on the benefit of Repo rate reduction by 85 bps during the current financial year to its CC/OD customers with Limits above Rs.1 lakh.
It comes at a time when the RBI has announced a sizeable cut in the repo rate today. The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) in its third bi-monthly Monetary Policy Statement for 2019-20 has cut the repo rate by 0.35 per cent today. This is the fourth rate cut announced in 2019 after which the repo rate now stands at 5.40 per cent. The RBI had already cut the rate by 75 basis points in the calendar year 2019 and hence taking today’s rate cut into account, the repo rate is down by 1.10 per cent since January 2019.
Depending on the need, SBI has several types of home loans to offer – Flexipay home loan, privilege home loan, Shaurya home loan, Pre-approved home loan, Realty home loan, and Bridge home loan, amongst others.
There are two unique features of the SBI home loan. Firstly, in the SBI Regular Home Loan, the bank calculates interest charges on daily reducing balance. This means repayments will get the benefit from the day it is paid back to the bank. Secondly, anyone between 18 and 70 years of age can take SBI home loan and can repay it over a tenure of 30 years. This means, by keeping a long term tenure, the EMI’s will be low and as there is no pre-payment penalty, one may repay the entire outstanding loan as and when the funds are available.