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State Bank of India is all Set to Introduce Repo Linked Home Loan Plans From 1 July Research Team | Posted On Tuesday, June 11,2019, 11:01 AM

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State Bank of India is all Set to Introduce Repo Linked Home Loan Plans From 1 July



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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State Bank of India (SBI) is All Set to Introduce Repo-Linked Home Loan Plans From 1 July

What are Repo-Linked Home Loans?

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.

  • One should have a minimum annual income of Rs 6 Lakhs to be eligible for SBI repo-linked home loans. The maximum loan tenure in case of under construction properties is 35 years. Otherwise, it cannot exceed 33 years.
  • As per official sources, repo-linked home loans are priced at 2.65% above the Repo rate of 5.75%. The total interest rate comes to 8.40% whereas the current SBI MCLR is 8.45%.

See Also: What Is My Home Loan Eligibility?

Why Repo-Linked Home Loans?

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.

See Also: Ready For A Home Loan

MCLR vs Repo Rate

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.

See Also: Does Home Loan Really Save Taxes?

How Does It Help You?

  • Rate transmissions take place real time.
  • The move definitely protects small borrowers and is good from their point of view.
  • Home loans will be comparatively cheaper if the Repo rate remains unrevised or goes down for a longer period of time.
  • Repo-linked home loans are great when the repo rate is falling and also the RBI has changed the stance from ‘neutral’ to ‘accommodative’.

See Also: Why Should You Avail A Home Loan?

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