Interest on home loans creeping down…

MUMBAI: Interest rates are slowly creeping down. State Bank India and IDBI Bank are the latest to bring down their marginal cost of lending rate (MCLR). The reason why the interest rate reductions are not noticeable is because of the new MCLR benchmark — based on monthly variations in cost of funds — and these revisions are as low as 5 basis points (100bps=1 percentage point).

SBI has reduced its marginal cost of lending rate by 5 bps effective August 1. SBI offers home loans at 20 bps above MCLR to women and 25 bps over MCLR to other borrowers. Effectively the home loan rate from August 1 would be 9.3% for women and 9.35% for others.

The rate cut by SBI is applicable on loans across all maturities. Following the reduction, the bank’s one-year MCLR — the rate to which most retail loans are pegged — has been reduced to 9.1% from August 1 from the 9.15% at present. Similar reductions have been effected on other maturities as well.

On Thursday, IDBI Bank reduced its base rate from 9.75% to 9.65%. The public sector lender had also recently reduced its MCLR. Other banks that had brought down MCLR in July include Axis Bank, Punjab National Bank, State Bank of Travancore and Syndicate Bank.

Since the MCLR has been in effect only from April, only new borrowers will be able to avail the lower rates. Those who raised loans in April would have to wait until their benchmark comes for renewal next year (since it is a one-year MCLR) to avail of the lower rate. Those whose home loans are pegged to the base rate will have to wait for the base rate to be revised. They can also ask for their loans to be pegged to the new benchmark.

Credits ET Realty

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