CHENNAI: In a fresh twist to the rate war in home loans, the country's largest lender State Bank of India is pitching its low interest rates to lure buyers who have already availed mortgages from rivals. The bank has sent out emails to prospective customers where it is marketing a balance transfer scheme in addition to selling fresh loans.
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 re-priced. The other highlights of its home loan include: absence of charges on foreclosures or pre-payments and a balance transfer fee of Rs 1,000. In addition, the bank also promises a maximum tenure of 30 years. Mortgage major HDFC is currently offering an interest rate of 10.25% for loans up to Rs 75 lakh. Other lenders are in the same range.
"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 (see box for interest rate comparison on home loans). 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," Adhil Shetty, said chief executive officer of Bank Bazaar.com.
Lenders are fighting for home loans in the absence of large loan off take from corporates. Also, banks are now targeting larger loans by offering uniform rates up to Rs 75 lakh as against Rs 30 lakh earlier. But over 80% of home loans in India continue to be below Rs 30 lakh.