SBI Raises Home Loan Rates by 25 Basis Points for New Borrowers
In a surprising move, India’s largest mortgage lender, State Bank of India (SBI), has increased home loan rates by 25 basis points for new borrowers, despite the Reserve Bank of India’s (RBI) recent decision to cut the repo rate to 5.5 per cent. The RBI’s move was aimed at easing borrowing costs and stimulating economic growth. However, SBI’s decision to hike home loan rates may come as a shock to potential homebuyers and mortgage seekers.
As per the latest developments, SBI has raised its home loan rates to 7.50%-8.70% for new borrowers. This marks a significant increase of 25 basis points from the previous rates. The new rates are applicable to both floating and fixed-rate home loans.
The hike in home loan rates by SBI is likely to have a ripple effect on the entire mortgage market. Public Sector Banks (PSBs) such as SBI, which dominate the home loan market, tend to follow each other’s rates. As a result, other PSBs may also increase their home loan rates, making it more expensive for borrowers to purchase a home.
The current home loan rates offered by PSBs range from 7.35% to 10.10%+, depending on the borrower’s credit score and other factors. For instance, HDFC Bank offers home loans at a rate of 7.35%-8.50%, while Axis Bank offers rates ranging from 7.40%-9.60%.
The reason behind SBI’s decision to hike home loan rates is not entirely clear. However, it’s possible that the bank is responding to increased lending costs, higher operational expenses, and a decline in its net interest margins. SBI’s net interest margin, which measures the difference between the interest earned on loans and the interest paid on deposits, has been declining in recent quarters.
The RBI’s decision to cut the repo rate was aimed at stimulating economic growth and easing borrowing costs. However, the impact of the rate cut may be limited if banks like SBI fail to pass on the benefits to borrowers. The repo rate is the rate at which the RBI lends money to commercial banks, and a cut in the repo rate is typically expected to reduce borrowing costs for individuals and businesses.
The hike in home loan rates by SBI is likely to have a significant impact on the housing market. Homebuyers may need to adjust their budgets and consider alternative options, such as increasing their down payment or opting for longer loan tenures. The higher interest rates may also make it more challenging for first-time homebuyers to purchase a home.
In conclusion, SBI’s decision to hike home loan rates by 25 basis points for new borrowers is a significant development that is likely to have far-reaching implications for the mortgage market. While the RBI’s repo rate cut was aimed at easing borrowing costs, SBI’s decision to increase home loan rates may have the opposite effect. As borrowers, it’s essential to stay informed about changes in interest rates and adjust their financial plans accordingly.
News Source:
https://investmentguruindia.com/newsdetail/sbi-raises-home-loan-rates-by-25-basis-points-for-new-borrowers728714
