SBI Increases Home Loan Interest Rates by 0.25%, Impacting New Customers

New Delhi (The Uttam Hindu): The country's largest bank, State Bank of India (SBI) has increased home loan rates for new borrowers by 25 basis points or 0.25 percent. The bank has made this increase in the upper band of interest rates. The band set by SBI for the interest rate of new home loans is between 7.50 percent to 8.70 percent. Earlier this band was between 7.50 percent to 8.45 percent.

SBI has increased the interest rates on home loans at a time when the Reserve Bank of India (RBI) has kept the repo rate stable at 5.5 percent in the monetary policy of August. Home loans are always given on the basis of credit score, banks give loans at a lower interest rate to those who have a good credit score. On the other hand, when the credit score is low, the opposite happens. In such a situation, the impact of increased interest rates will be more on those with low credit scores.

Other public sector banks like Union Bank of India, Bank of India, Bank of Maharashtra and Central Bank of India are offering interest rates ranging from 7.35% to 10.10% on home loans to customers. After SBI increased the interest rate on home loans, other banks may follow it.

Earlier, the bank had released a report stating that the reduction in repo rate by RBI will make home loans cheaper. This change will be felt first in loans linked to External Benchmark Lending Rate (EBLR), which accounts for about 60 percent of all loans given by scheduled commercial banks (SCBs).

At the same time, SBI has cautioned that though lower rates benefit borrowers, banks may face pressure on their profit margins.