State Bank of India is one of the biggest home loan lenders in India and has assisted over 3 million families buy a dream home. The bank is armed with a sales team of 1,600 plus representatives and has 24,000 branches. It had won the award of the ‘Best Home Loan Provider’ at the CNBC Awaaz Real Estate Awards in the year 2016. It is a well-reputed brand offering attractive home loans. Now, SBI is all set to launch repo-linked housing loans with effect from 1st July 2019.
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The repo rate is a rate at which the Reserve Bank of India lends money to commercial banks if there is a shortage of funds. It is a tool used to control inflation and gets revised whenever required. Unlike fixed and floating rate home loans, the interest payments on repo-linked home loans are in sync with repo rates. In addition to this newly introduced scheme, SBI continues to offer its existing MCLR and fixed rate-based home loans.
See Also: What Is My Home Loan Eligibility?
Banks lend at an interest rate, which is not lower than their Marginal Cost of Funds based Lending Rate (MCLR). MCLR was implemented on 1st April 2016 to determine the home loan interest rates. If RBI cuts the Repo rate, most banks don’t pass on the benefit to customers. There is no transmission of the repo rate cut as cost of deposits for banks is high. When RBI increases it, banks are eager to increase their lending rates. RBI, therefore, has asked all banks to provide repo-linked home loans to tackle this problem.
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The interest rate on SBI repo-linked home loans is expected to be between 8.40-8.55%, while the interest rate on SBI MCLR-based home loan is between 8.70-9.25%. You cannot take this at face value. Check the actual rate of interest based on your loan amount, tenure, profession and so on. Repo-linked home loans are suitable for those who are eager and ready to accept frequently changing interest rates. Borrowers should also be ready to pay a higher interest rate when the Repo rate goes up. The preference for a repo-linked home loan depends on your risk appetite and interest.
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