The Home Loan Interest Rates were cut down by the India’s largest bank ‘State Bank of India’ from 9.10% to 8.6% and this result the home loan rates have fallen to their lowest level in six years. While the State Bank of India (SBI) cut its one-year marginal cost of lending rate (MCLR), the target to which home loans are linked to 8% rather than 8.9% earlier, it kept the spread above MCLR at 60 basis points, against 20 basis points earlier.
Meanwhile, home loans up to Rs 75 lakh, earlier available at 9.1% is now taking at 8.6%. For other people, it would be 8.65%, against 9.15% earlier. Apart from SBI, Punjab National Bank and the Union Bank of India also cut down the home loan rates. Private sector leading bank ICICI is also looking to follow the same strategy.
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Earlier reports said that the SBI and other banks were cut down the rates following Prime Minister Modi’s push to hint that benefits of demonetization in the form of record deposits are being shared with the poor and middle class.
However, the drop in lending rates announced by several public sector banks will mark the affordable home loan scheme, announced by PM Modi on Jan 1st, available at a little over 4% for debtors looking for loans up to Rs 9 lakh. The details of the scheme are not yet to be announced. The decrease in MCLR will allow new borrowers to get loans at the cheaper rates.
Old loans will get the benefit of the new rates only after their one-year lock-in ends. People those who had got loans before April 2016 would have their EMIs linked to the earlier benchmark. The SBI has also restored a teaser rate loan, where loans will be available at 8.5% for the first two years at a floating rate in following years.
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Other banks which have announced lower rates with the result from the New Year include Sate Bank of Travancore, IDBI Bank, and Indian Overseas Bank. SBI bank officials said that home loans would provide the bank with an alternative to space funds in government bonds where the return is less than 7%.
Meanwhile, the banks imagine the interest subsidy on loans for affordable homes and small scale businesses to counter the stoppage caused by economic tightening following demonetisation.