State Bank of India (SBI) has recently confirmed a reduction of 0.30% in the base rates to 8.65% from the previous threshold of 8.95%. This may seem major until it is worked out that this will be applicable solely for home loan customers who got their loans sanctioned prior to April, 2016. People who got their home loans sanctioned in July, 2010 when base rates came into the picture will continue repaying interest at 10.40% per annum in spite of this reduction in base rates.
Customers who had taken home loans under the PLR (prime lending rate) prior to the introduction of the base rate are also facing a sticky situation in spite of the PLR being lowered by State Bank of India (SBI) by 0.30% from 13.70% to 13.40%. People who got their loans sanctioned in June, 2010, will be paying 10.90% in comparison to 8.35% that is being repaid by new home loan customers in recent times. There are an estimated 80 lakh home loan customers whose home loan rates are tied to the base rates and these are people who have not switched to the MCLR system.
Additionally, borrowers who have good track records of repayment will have to take the initiative to switch their loans to other financial institutions for the current lender to offer a lower rate of interest accordingly. Most home loan borrowers are not aware of the rates of interest being paid on the home loan and also about the system to which the rates are linked. Borrowers should refrain from making complex calculations since it will always be more practical to switch to the MCLR system with their current or new financial institutions. You should communicate with your current lender, talking about the sum needed to fully repay the loan and also the certificate that indicates the title deeds that are held by the lender.
This indicates to the financial institution that you are thinking of switching your loan and if you have been a responsible customer, there may be a better offer on the table. In case there are no responses from the lender within a period of 1 month, you could file your grievance at the official address on the website via a letter or email. In case your current lender offers a deal that has low interest rates you can always accept the same even if you have to fork out a small charge for switching the loan to the MCLR system.
In case your lender does not come up with an attractive offer, you should compare other options available in the market. You will definitely come across a decent home loan offer with lower rates of interest unless your credit score is on the lower side or the outstanding home loan amount is lower than a particular threshold of about Rs. 20 lakh or so. You can look to lower your overall costs of interest. This may require added charges by way of stamp duties and so. Most financial institutions will be pleased to offer a waiver of processing and other charges. If your home loan was sanctioned prior to April, 2016, you should switch to the new MCLR system at the earliest.