In a move that will ease the pressure for new home loan borrowers, State Bank of India, the country's largest lender, has reduced interest rate on home loans by 0.25 percentage points, bringing it on par with market leader HDFC, and signalling the start of a softer rate cycle.
For women borrowers the rate has been aligned to the base rate, or the minimum lending rate of 9.85% per annum, SBI said.
For other borrowers, the interest rate will be 9.90%, 0.5 percentage points higher than the base rate. The rates will be applicable for all home loans sanctioned on or after April 13, SBI said.
Analysts said lending rate cuts by banks are likely to boost sentiment and could result in an increase in activity for housing finance companies, besides giving a fillip to construction firms as customers will now rush to finalise loan agreements.
"Interest rate for existing floating rate home loan borrowers has also been cut to the extent of reduction in the bank's base rate by 15 basis points. The revised EMI per lakh for a loan tenure of 30 years will be `867 (for women) and `871 (for others), against `885 and `889 respectively earlier," SBI said.
SBI's announcement follows an April 11 anouncement by HDFC, where the mortgage leader reduced its home loan rate by 0.20 percentage points to 9.9%. The cut follows a strong call by RBI governor Raghuram Rajan, who asked banks to reduce rates after the central bank slashed the repo rate - the rate at which banks borrow from RBI - twice in the past three months.
"The strong statement by RBI governor on the reluctance of banks to cut the lending rates has had an impact," said Jayesh Kumar of Kotak Securities.