MUMBAI: SBI has upped the stakes in the competitive home loan market by offering loans
up to Rs 5 lakh at a fixed rate of 8% for five years and cutting rates by 50-75 basis points for higher value loans.
The rates will apply only to new customers as the bank, which has cornered a lion’s share of home loans market through specials schemes, has not revised its prime lending rate.
SBI’s three-month campaign ‘My Home’ targets home buyers in the festive season. Other PSU banks offer a fixed rate of 8.5% on home loans up to Rs 5 lakh for five years and a fixed rate of 9.25% for loans up to Rs 20 lakh under a scheme worked out by IBA.
SBI’s mortgage loan book has grown Rs 10,076 crore in the 12 months ended May 2009, which is over 77% of the Rs 13,028 crore growth recorded by the banking industry. SBI has home loan portfolio of Rs 57,500 crore.
Besides cutting rates for low-value loans, SBI has also cut the interest rate on higher value loans in the second and third year. Loans up to Rs 50 lakh are now available at an annualised rate of 8% for the first year and 8.5% (9% earlier) for the second and third year.
After three years, the customer has a choice of a floating rate 2.75% (compared with 2% earlier) below the bank’s prime lending rate (PLR) or a fixed rate at 1.25% (against 1%) below the PLR. Loans above Rs 50 lakh will continue to attract 8% for the first year, but will pay a lower rate of 9% (against 9.5%) for the second and third year. After three years, the customer can choose between a floating rate at 1.75% (1%) below the PLR and a fixed rate at 0.75% (0.5%) below PLR.
HDFC, SBI’s closest rival, said its rates continued to be competitive vis-à-vis SBI rates. The housing finance company had cut rates in July. HDFC offers loans up to Rs 15 lakh at 8.75%, up to Rs 30 lakh at 9% and above Rs 30 lakh at 9.5%.
In SBI’s Rs 5-lakh loan scheme, a customer can either switch to a floating rate of 2.75% below the bank’s PLR (State Bank Advance Rate or SBAR) after five years, or a fixed rate of 1.25% below SBAR for another five years.
“We see huge demand for Rs 5-lakh loans from the weaker sections and from non-metro areas. This prompted us to offer the special scheme. Out of 73,700 applications that SBI received in Q1 of this fiscal, nearly 25,000 applications are for loans up to Rs 5 lakh,” said P Nanda Kumaran, chief general manager, retail loans.
According to HDFC, it has very few loans of Rs 5 lakh and below. “From a borrower’s perspective, these schemes will be a boon for those who prepay the home loan within 10 years. The revised rate will also be linked to the PLR, hence customers won’t be charged any arbitrary interest rate,” said certified financial planner Suresh Sadagopan.
The bank will not charge a prepayment penalty after the third year. However, the customer has to pay a penalty of 2% if they switch lenders for servicing the loan, an SBI official said.