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Why SBI Home Loan Becomes Cheaper? Research Team | Posted On Wednesday, September 04,2019, 12:09 PM

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Why SBI Home Loan Becomes Cheaper?



SBI Home Loan has been cheaper from September 1st. SBI which is India’s largest lender has cut down home loan rates from 8.25% to 8.05% from 1st September 2019. You can now expect home loan EMIs to go down.

The RBI has cut repo rate by 110 basis points this year. Repo rate is 5.4%. After the dismal GDP growth of 5% in the first quarter, the Government has to do something. The popular expectation is a repo rate cut of 40 bps by the RBI, this October.

SBI had reduced MCLR by 15 bps and home loan interest rates came down by 35 bps from April 2019.  The interest rates which are linked to SBI repo-linked home loans have come down to 8.05% from September 1st 2019. They used to be as high as 8.4%.

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Why SBI Home Loan Becomes Cheaper?     

Why SBI Repo Rate-Linked Home Loans?

The SBI repo rate-linked home loan means any changes in the key interest rate (repo rate) by RBI are passed on directly to the bank customers. You enjoy lower home loan rates.

When there is a change in the RBI repo rate, the SBI repo-linked lending rate popularly called RLLR changes automatically and home loan rate changes. Now, RBI is cutting down repo rates. Expect SBI home loan rates to go down.

See Also: Home Loan Interest Rates

How is SBI Home Loan Rate Calculated?

RBI cut the repo rate by 35 basis points (35 bps) from 5.75% to 5.4% on August 7th 2019. SBI has a 225 basis points or 2.25% mark-up over the repo rate.

SBI RLLR or repo-linked lending rate has fallen to 7.65%. (This is 5.4% + 2.25%). Now, SBI charges a spread depending on your credit score. This ranges from 40-55 basis points.

Let’s take SBI home loans up to Rs 75 Lakhs. You have RLLR + 40 basis points if you have a good credit score or RLLR + 55 basis points for the average credit score.

Home loan borrowers with good credit score availing home loans up to Rs 75 Lakhs; pay SBI home loan rates of 8.05% from September 1st 2019.

When SBI introduced the repo-linked home loan on July 1st 2019, the repo-linked lending rate stood at 8%. (This was exclusive of the spread/other charges).

See Also: Home Loan EMI Calculator

What About Home Loans Above Rs 75 Lakhs?

For SBI home loans above Rs 75 Lakhs; the spread increases to repo-linked lending rate (RLLR) + (95-110 basis points), depending on credit score.

How SBI Home Loan Works?

Let’s say you have availed an SBI home loan of Rs 25 Lakhs for home loan tenure of 20 years. The SBI home loan interest was 8.25%. Using the IndianMoney home loan calculator the EMIs work out to be Rs 21,302.

Now, let’s say you delay the SBI home loan application to September 1st 2019. The SBI home loan interest is 8.05%. All other factors being the same, the home loan EMI reduces to Rs 20,909. So, if you had delayed home loan application to September 1st 2019, you would have saved Rs 313 each month. This is a massive savings over a 20 year home loan tenure.

See Also: Tips For Home Loan EMI Repayment

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