Home loans to cost more; SBI too hikes rates
By Our Banking Bureau | 22 Feb 2006
SBI has revised upwards the interest rates on home loans with effect from 01 March 2006 by between 25 basis points and 75 basis points, depending on tenure. The revised rates would be applicable only to loans sanctioned and disbursed on or after 01 March.
Floating rate loans
| Tenure in years | Existing rate % | Revised rate % |
| 0-5 | 8.0 | 8.5 |
| 6-15 | 8.5 | 8.75 |
| 16-20 | 8.75 | 9.25 |
Fixed rate loans
| Tenure in years | Existing rate % | Revised rate % |
| 0-5 | 8.5 | 9.25 |
| 6-10 | 9.0 | 9.5 |
| 11-15 | 9.0 | Discontinued |
| 16-20 | 9.25 | Discontinued |
Private sector lenders like ICICI Bank and HDFC had also raised interest rates on home loans recently. ICICI is the market leader in the home loan segment in terms of new sanctions. HDFC is a pure home mortgage player and has recently crossed Rs1 lakh crore in aggregate disbursements.
Interest rates have been going up for the last few months after the RBI hiked overnight lending rates twice by 25 basis points each. As credit growth remains strong, banks have raised interest rates on deposits to attract more funds. SBI had raised interest rates on domestic term deposits last month.
Real estate prices have risen substantially over the last few years and this has resulted in high demand for home loans. The rise in disposable income is also fuelling the demand.
The tax benefits available on home loan interest and repayment is also a major factor in driving demand for such loans. As per the current regulations, individuals can claim up to Rs1 lakh per annum as deduction for home loan principal repayment and additional deduction of Rs1.5 lakh towards interest payments.
Analysts expect real estate prices to remain firm in the short to medium term. Hence, the marginal increase in home loan rates may not impact growth rates for the lenders.