SBI home loans to become cheaper for both new and existing borrowers
The country’s largest lender, the State Bank of India (SBI), has cut its MCLR by 5 basis points across all tenors. Marginal Cost of Funds Based Lending Rate (MCLR) is an internal benchmark of banks and is a reflection of the bank’s own cost of funds.
With lowering of MCLR, lending rates come down as well. After this reduction, the 1-year MCLR of SBI has come down from 8.50 per cent to 8.45 per cent.
The immediate impact will be that the interest rates on all loans linked to MCLR will stand reduced by 5 basis points with effect from 10th May 2019.
A lower MCLR will effectively mean a lower home loan interest rate and, thereby, a low-interest burden, other factors remaining constant. The move will benefit all car loan and home loans borrowers .
This is the second rate cut over the last one month. After the April Monetary Policy, the MCLR was reduced by 5 bps. With today’s MCLR cut, the reduction in the Home Loan Rates since April 10th, 2019 till date is 15 bps.
Both the new and the existing home loan borrowers will stand to benefit from this move. However, for an existing borrower, the reset date will decide when the EMI will fall. 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 May or in the next few months will stand to gain in terms of lower EMIs.
Linking the savings deposit rate to an external benchmark may have helped SBI bring the interest rate down. Earlier, the rules for earning interest rates in a SBI savings account balance were changed. The rate of interest will no more be a fixed percentage, but will vary as per the changes in the repo rate as set by the RBI.
However, the variable interest rate will be applicable only on the balance above Rs 1 lakh, while those with lesser balance will continue to earn 3.5 per cent per annum. Therefore, small depositors will not be impacted. Effective 1st May 2019, the savings bank interest rate for balances above Rs 1 lakh will be 2.75 per cent below the RBI’s Repo Rate, i.e. 3.25 per cent. The RBI repo rate is currently at 6 per cent.
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.
The 7 factors on which the home loan interest rate of SBI Home Loan depends are –
(i) MCLR of SBI
(ii) Mark-Up on your loan
(iii) Amount of loan that you wish to avail
(iv) Whether you are salaried or a non-salaried
(v) Your gender
(vi) Your risk group as determined by SBI
(vii) And lastly on the LTV ratio.
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 are no pre-payment penalty, one may repay the entire outstanding loan as and when the funds are available.