The State Bank of India (SBI) has increased its home loan interest rates by 25 basis points, bringing them to 7.5%-8.70%. This increase will primarily affect new customers with lower credit scores. The existing loan portfolio of ₹8 lakh crore will remain unaffected. Union Bank has also raised its rates, making home buying more expensive.
SBI Interest Rates: In a setback for home loan seekers, SBI, the country's largest public sector bank, has increased interest rates. Previously ranging from 7.5% to 8.45%, the rates have now risen to 7.5% to 8.70%. This change primarily applies to new customers with lower credit scores. Existing loan holders will not be affected. In addition to SBI, Union Bank of India has also increased its interest rates. At a time when the RBI is reducing the repo rate, this increase by public sector banks could make it more difficult for ordinary people to buy homes.
What is the New Interest Rate?
At the end of July, SBI's interest rates were between 7.5 percent and 8.45 percent. Now, after the new changes, these rates have increased to between 7.5 percent and 8.70 percent. This means that customers with good credit scores will benefit from the minimum interest rate, while those with lower scores will have to pay more interest.
Who Will Be Most Affected?
This increase will primarily affect those with weaker credit scores. The bank has increased the upper limit of its loan rates, which means new customers will have to pay more interest. Home loans will now be more expensive for people with low CIBIL scores.
This change will only apply to new customers. Existing home loan holders will not be affected by the current increase. SBI states that this decision was taken keeping in mind new customers with low credit scores.
Union Bank Also Raises Rates
Along with SBI, Union Bank of India has also increased its interest rates. Until the end of July, Union Bank's rates were 7.35 percent, which have now been increased to 7.45 percent. This means that public sector banks are continuously changing interest rates.
Situation of Private Banks
Looking at private banks, HDFC Bank is currently offering home loans starting from 7.90 percent. ICICI Bank's initial rate is 8 percent, and Axis Bank is offering home loans from 8.35 percent. In comparison, SBI's new rates are approaching those of private banks.
Interestingly, the Reserve Bank of India has cut the repo rate on most occasions this year. Despite this, public sector banks are increasing interest rates. Banking sector experts say that this step by SBI and Union Bank is based on customer demand and credit scores.
How Large is SBI's Portfolio?
SBI has the largest retail loan portfolio in the country. Home loans make up the largest part of it. The bank has a loan portfolio of approximately ₹8 lakh crore. In such a situation, such a change in interest rates directly affects millions of customers.
Increased Difficulties for Home Buyers
This increase could be a major obstacle for those planning to buy new homes. Already rising inflation and expensive real estate prices have made it difficult to buy a home. Now, with the increase in interest rates, the EMI will increase further, which will increase the burden on the common man.
