SBI raised interest rates on home loans

One of the largest PSU bank in India State Bank of India (SBI) and other leading players in the housing loan market has raised interest rates on home loans. Although the bank will continue with its 8% teaser rate, which they had introduced a year ago, that too only for the first year, now it has increased rates for the subsequent years, effective April 1. The hike in home loan rates by SBI was triggered by the recent increase in its cost of funds.

Till March 31, SBI had two schemes, Easy Home Loan (up to Rs 50 lakh) and Advantage Home Loan (above Rs 50 lakh). '' From April 1, both the schemes have been merged and extended for a month,'' an SBI spokesperson confirmed to TOI. '' The rates applicable for new loans sourced from April 1 till April 30 are 8% for the first year, 9% for the second and third years and floating rate at 1.75% below SBAR (SBI's equivalent of prime lending rate, or PLR) thereafter,'' the spokesperson added.

So in result, the home loan rates for the second and the third years have gone up by 50 basis points (100 basis points=1%), from 8.5% earlier to 9% now. While fourth year onwards, at the current structure, the interest rate will be at 10% per annum, since currently SBAR is at 11.75%. Earlier, from the fourth year onward, the floating rate was at 2.75% below the SBAR and the effective rate was 9%.