Interest rates on home loans are steadily reducing in the current scenario where the Reserve Bank of India (RBI) has already cut the repo rate 5 times in succession. SBI (State Bank of India), the largest bank in the country, has reduced its lending rates once again for customers.
SBI has lowered its Marginal Cost of Fund Based Lending Rate or MCLR by 5 basis points throughout all tenors. This is the 7th successive reduction in home loan interest rates in the current fiscal by State Bank of India (SBI). Post this cut in rates, the 1-year MCLR at SBI will reduce to 8% per annum and this is effective from 10th November, 2019.
Key developments worth noting
- The 1-year MCLR is the benchmark for pricing a majority of retail loans such as auto loans and home loans.
- HDFC Bank has also reduced MCLR sometime earlier for multiple tenors by up to 10 basis points.
- MCLR is tied to the deposit rates of the bank. In case the home loan is tied to the 1-year MCLR, the interest rate will be reset post the completion of a year’s time.
- SBI has also confirmed revised FD (fixed deposit) rates and has cut the same by 15 basis points. This is for deposits between 1 year to less than 2 years in terms of maturity.
- Bulk deposit rates have come down at SBI by 30-75 basis points for various tenors. The ample liquidity in the banking system has been cited as the reason for the cut in rates of fixed deposits.
- The RBI (Reserve Bank of India) has already lowered the repo rate cumulatively by 135 basis points this year.
- Several banks have also linked retail lending rates to external benchmarks while also lowering the MCLR at the same time.
- SBI is also offering a home loan product tied to the repo rate and under this, it has a 265 basis points spread over and above the repo rate of the RBI which is presently at 5.4%. This works out to 8.05% and SBI will also charge a premium for the calculation of the effective interest rates for home loans of customers.
More about the FD rate revision at SBI
SBI has revised rates of interest on term deposits or FDs (fixed deposits). The bank has revised its fixed deposit rates due to ample liquidity and they are effective from 10th November, 2019, onwards. Here are the latest FD interest rates applicable at State Bank of India (SBI)-
For deposits below Rs. 2 crore (regular customers)-
- 7-45 days- 4.50%
- 46-179 days- 5.50%
- 180-210 days- 5.80%
- 211 days-less than 1 year- 5.80%
- 1 year to less than 2 years- 6.25%
- 2 years to less than 3 years- 6.25%
- 3 years to less than 5 years- 6.25%
- 5 years and up to 10 years- 6.25%
For deposits below Rs. 2 crore for senior citizens-
- 7-45 days- 5%
- 46-179 days- 6%
- 180-210 days- 6.30%
- 211 days-less than 1 year- 6.30%
- 1 year to less than 2 years- 6.75%
- 2 years to less than 3 years- 6.75%
- 3 years to less than 5 years- 6.75%
- 5 years and up to 10 years- 6.75%
Rates of interest on fixed deposits (FDs) have also been lowered by several other banks including PNB (Punjab National Bank), HDFC Bank, Axis Bank and Kotak Mahindra Bank for select tenors and categories.
While FD interest rates come down, home loan interest rates are also cheaper than before which should give a major fillip to first-time homebuyers and investors alike. This should also play a major role in the recovery and growth of the Indian residential real estate sector going forward as per experts.