SBI cuts home loan rates yet again

Intensifying the battle in the home loan market, State Bank of India, the country's largest bank, today further cut its home loan rates rates to attract customers across income segments. At the same time, the limit on the 'easy home loan' scheme has been enhanced from Rs30 lakh to Rs50 lakh.

For loans up to Rs50 lakh, SBI will charge 8 per cent in the first year, while it has reduced the second- and third-year rates from 9 per cent to 8.5 per cent. From the fourth year on, the conditions are the same as that in the 'hi-five loan scheme.

For loans above Rs50 lakh under the advantage home loan scheme, the new rates are 8 per cent (first year), 9 per cent (second and third years) and a floating rate of 1.75 per cent below SBAR or a fixed rate of 0.75 per cent below SBAR from the fourth year.

There will be no processing fees, free personal accident insurance and no levy on prepayment of loans if they are paid from the borrower's own resources. Said P Nandakumaran, chief general manager, personal banking, SBI, ''We have taken the lead and expect others to be in step with us.''

Industry sources said with this cut, the bank's rates look the most attractive among competitors. For those in the easy home loan scheme, which targets the largest segment of borrowers of loans between Rs 5 lakh to Rs 50 lakh, the savings would be quite substantial.

A borrower would have paid an equated monthly instalment (EMI) of Rs36,989 for a 20-year Rs40 lakh loan at 9 per cent in the second and third years. At the rate of 8.5 per cent, his EMI would come down to Rs34,712 - a monthly saving of Rs 1,277 and annual saving of Rs15,324.

This means that in the easy home loan scheme, the new rate would be 8.76 per cent a year, down from 9.58 per cent a year (for a 20-year loan).

For a similar tenure and loans between Rs 15 lakh and Rs 30 lakh, HDFC's average is 9 per cent and ICICI Bank's is 9.25 per cent. Canara Bank's average rate is 9.67 per cent.