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  • SBI Home Loan Interest Rate Cut

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  • From time to time, SBI has promptly altered their interest rates on their financial products. Recently, SBI has made it to the headlines as they cut their lending rates on home loans. This is not the first time in 2017 that SBI has reduced their interest rates.

    SBI Home Loan Interest Rate Cut

    Month MCLR rate for overnight MCLR rate for 1 month MCLR rate for 3 months MCLR rate for 6 months MCLR rate for 1 year MCLR rate for 2 years MCLR rate for 3 years
    10 August 2019 7.90 7.90 7.95 8.10 8.25 8.35 8.45
    10 July 2019 8.05 8.05 8.10 8.25 8.40 8.50 8.60
    10 June 2019 8.10 8.10 8.15 8.30 8.45 8.55 8.65
    10 May 2019 8.10 8.10 8.15 8.30 8.45 8.55 8.65
    10 April 2019 8.15 8.15 8.20 8.35 8.50 8.60 8.70
    10 March 2019 8.20 8.20 8.25 8.40 8.55 8.65 8.75
    10 February 2019 8.20 8.20 8.25 8.40 8.55 8.65 8.75
    10 January 2019 8.20 8.20 8.25 8.40 8.55 8.65 8.75
    10 December 2018 8.20 8.20 8.25 8.40 8.55 8.65 8.75
    10 November 2018 8.15 8.15 8.20 8.35 8.50 8.60 8.70
    10 October 2018 8.15 8.15 8.20 8.35 8.50 8.60 8.70
    10 September 2018 8.10 8.10 8.15 8.30 8.45 8.55 8.65
    10 August 2018 7.90 7.90 7.95 8.10 8.25 8.35 8.45

    SBI home loan interest rate cut is definitely influencing other banks to reduce their lending rates on home loans too. If you are planning on buying a home, this is the right time to apply for a home loan with SBI.

    Background of Rate Cuts on Home Loans in India

    Buying a home is a dream for many. With frequent rate cuts from leading banks like SBI, millions of people who dream of owning a home are able to fulfill their dreams. In the last two months, SBI has reduced their lending rates on home loans twice, which is a good news for everyone who wants to buy a new house.

    For the financial year 2017-2018, the Reserve Bank of India conducted the second bi-monthly review meeting on 7 June 2017. At this meeting, the repo rate was unchanged. What is a repo rate? Repo rate is the rate at which banks borrow funds from the central bank. Despite RBI not reducing the repo rate or lending rates on home loans in any of their meetings, many banks took an extra mile and cut their interest rates.

    Starting from 1 April, 2016, the Reserve Bank of India had asked all the banks to follow the MCLR system to charge interest on home loans. RBI has introduced this new methodology as they noticed that whenever RBI increases the interest rates, all the banks quickly followed the trend and increased the rates. On the other hand, when RBI reduces the interest rates, banks were too slow or did not reduce the interest rates. In which case, the rate cut did not reach the borrowers. To play a fair game, RBI introduced the MCLR system.

    Under the MCLR system, all the loans, including home loans will be linked to the marginal cost of funds based lending rate. Before MCLR system was introduced, banks were linking all their loans to their base rate. Banks following the MCLR system will be required to calculate their marginal cost of funds based lending rate based on the sources of borrowings of the bank and the return on the equity. In general, RBI has prescribed the below formula to calculate MCLR:

    The marginal cost of funds= Marginal cost of borrowings x 92% + Return on net worth x 8%

    All banks will be required to calculate at least 5 MCLR, namely overnight MCLR, 1- month MCLR rate, 3 months MCLR rate, 6 months MCLR rate, and one-year MCLR rate. People who have availed loans before 1 April, 2016 and are charged under the base rate system can also switch to the new MCLR system. However, your bank may charge a fee to switch you to MCLR system.

    All You Need to Know About SBI Home Loan Interest Rate Cut

    To attract home loan customers and to promote affordable housing, SBI has recently cut their interest rates. The interest rates were reduced after the RBI reduced the repo rate in August 2019 by 35 basis points. This cut is applicable to customers with both the new repo rate-linked loans and existing loans. .

    For salaried individuals with home loan amount up to Rs.30 lakhs, the bank will charge an interest rate ranging from 8.35% to 8.50% p.a. For home loan amount above Rs.30 lakhs and up to Rs.75 lakh, the interest rates range from 8.60% to 8.75% p.a. For home loans above Rs.75 lakh, the interest rates range from 8.70% to 8.85% p.a.

    Not to forget, in the month of January, State Bank of India had cut their MCLR across all tenors by 90 basis points which was the highest rate cut in several years. With this recent rate cut, SBI strongly believes that they will gather many home loan customers as they have noticed an increase in their sales when they reduce the rates.  

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