By Accommodation Times News Services
State Bank of India (SBI) in an attempt to attract the home loan borrower is pitching its low interest rates to those who have already availed mortgages from rivals, to get them to switch over. The bank has sent out emails to prospective customers where it is marketing a balance transfer scheme in addition to selling fresh loans. The increasing inflation in realty market has created a sluggish situation in home loan sanctions and the competition over the rate of interest is rising.
SBI offer loans up to Rs 75 lakh at an interest rate of 10.15% or 15 basis points above its base rate of 10%. The base rate is the benchmark rate on which its floating rate loans are repriced. The other highlights of its home loan include absence of charges on foreclosures or pre-payments and a balance transfer fee of just Rs 1,000. In addition, the bank also promises a maximum tenure of 30 years.
‘The takeover campaign has been launched with a view to provide an option to switch over to our home loans, which have the lowest interest rate,’ senior officials from the bank said. During the third quarter of FY14, home loans acquired from other lenders accounted for 11% of the bank’s home loan book.
But even as SBI pitches its low rates to customers of rivals, some of the bank’s own customers are paying higher rates. ‘Consumers need to be watchful. In the current scenario, such rate cuts are only for new borrowers. When such schemes are announced, old borrowers should take the opportunity to refinance their existing loans with their existing banks or home finance companies. Otherwise, only a base rate cut entails benefits across the board.
By increasing its basic rates of 10.15% for loans up to Rs 75 lakh, SBI appears to be testing the waters for increasing its loan size for extended tenure (30 years). ‘In case of home loans above Rs 75 lakh, rates change depending upon credit profile of the borrower,’ said an official from a prominent home finance company who did not wish to identified. For instance, SBI is offering 10.3% for loans above Rs 75 lakh currently.