Barely a month on, the State Bank of India (SBI) has gone back to its old home loan interest rates after hiking it by 25 basis points to 6.95%.
Normally, the other banks follow SBI’s footsteps and the expectation was that interest rates on home loans would stiffen after they were pushed down to historical lows. But this time the other banks held on to their old rates and the country’s largest lender probably misjudged that interest rates would inch up after bottoming out.
Now, effective 1 May, SBI has reverted to its festive offer rate of 6.70% for home loans up to Rs 30 lakh. This is a climb down from its earlier stance when the bank had justified its increase by stating that the 6.70% rate was “only a festive offer till 1 April”.
SBI, however, has done a segmentation this time. For home loans above Rs 30 lakh and up to Rs 75 lakh, the bank has fixed the interest rate at 6.95%. Loans above Rs 75 lakh will be charged at 7.05% rate of interest, up from 7% earlier.
Under the festival scheme, all home loans up to Rs 75 lakh were priced at 6.70% interest rate and for borrowers of over Rs 75 lakh the charge was 6.75%.
“The loans up to Rs 30 lakh as an asset class have performed well and withstood the severe lockdowns and disruptions in economic activity. Most of our borrowers are first time home buyers and don’t want a default on their home loans. If you notice, the lowest rate is available for Rs 30 lakh loan, the segment which performed well and did not require additional risk premium,” SBI managing director (Retail & Digital banking) C S Setty told Indianbankingnews.com.
In effect, SBI has lowered the interest rate for home loans up to Rs 30 lakh while at the upper end it has increased it by 0.5%. For home loans between Rs 30 lakh and Rs 75 lakh, the interest rate remains unchanged at 6.95%.
What could have weighed in SBI’s mind is that some rival lenders were offering cheaper home loans. Even after SBI lifted its festive offer scheme that made its minimum interest rate on home loans costlier at 6.95%, competitors ICICI Bank and Axis Bank refused to budge and continued to offer at 6.70%. Kotak Mahindra Bank was offering loans in this category at 6.65%. However, HDFC Ltd, the largest non-bank home financier, hiked its rates back to 6.95%.
SBI, the country’s largest home loan financier, continues to give special offers to women home buyers. The women borrower gets a special 5 bps concession while customers can also apply for a loan from the ease of their home via the YONO App to earn an additional interest concession of 5 bps, SBI said on Saturday.
SBI is planning to double its home loan book to Rs 10 lakh crore in the next five years. Offering interest at the lowest rates, launching digital initiatives and starting a co-lending model are some of the steps the bank said it will take to grab home loan customers.
SBI took about 10 years to grow its home loan portfolio from Rs 89,000 crore in FY2011 to cross the Rs 5 lakh crore mark in February.
