After holding rates for months, banks have kicked off an interest rate war to attract home loan customers. State Bank of India on Sunday cut its home loan rates by 25 basis points matching rival lender HDFC’s new offer announced last week. With two major lenders cutting rates, others cannot afford to stay put.
SBI’s interest rate for new home loans for women will be 9.85 per cent compared with 10.10 per cent earlier. Others can get home loans at 9.9 per cent instead of 10.15 per cent. The new rates will be applicable from Monday.
The interest rate for existing floating rate home loans has also been reduced by 15 basis points. SBI cut its base rate to 9.85 per cent from 10 per cent with effect from April 10. The revised EMI per lakh for a loan tenure of 30 years is ₹867 (for women) and ₹871 (for others) compared with ₹885 and ₹889, respectively, before the rate cut. Last Friday, HDFC, the country’s leading standalone housing finance firm, cut its home loan rate by 20 bps to 9.9 per cent.
So far in 2014-15 (up to February 20), banks collectively reported incremental home loan growth of ₹78,800 crore against ₹71,400 crore in the year-ago period, according to RBI data. However, the growth of the home loan portfolio slowed to 14.5 per cent against 15.6 per cent.
Since January, the RBI has been urging banks to cut lending rates. But banks did not oblige even after the RBI cut policy rates. After some plain-speak by RBI Governor Raghuram Rajan last week, banks finally blinked.
While SBI and HDFC Bank pared their base rate (minimum lending rate) from 10 per cent to 9.85 per cent, ICICI Bank cut it to 9.75 per cent.