State Bank of India's old home loan borrowers have a reason to rejoice. The bank has decided to allow these borrowers to switch over to the new floating rates that are lower, said a bank official.
Borrowers who have taken loans linked to SBAR (State Bank Advance Rate or the prime lending rate) are paying as much as 2-3 percentage points more than existing floating rates that are linked to the Base Rate.
This is because the Base Rate is lower than the SBAR. SBI's Base Rate is currently at 10 per cent, while the SBAR is 14.75 per cent. Besides, the bank has also reduced the spread it charges over the Base Rate for home loans. Because of this, new home loan rates have moved southwards, said the official.
There is no restriction on the tenure or the amount of the loan for customers to switch over. The bank is charging a fee of 1 per cent of the outstanding amount to switch to the new rate
The current floating rates are:
- 10.5 per cent for loans up to Rs 30 lakh,
- 10.75 per cent for loans between Rs 30 and 75 lakh, and
- 11 per cent for loans above Rs 75 lakh.
Those borrowers who took a home loan even a year ago are paying higher rates. In some cases, the difference is as high as 3 percentage points. So, in the interest of fair practices and transparency, we are offering the current floating rates to all our customers. On an average, the benefit to old customers could work out to be more than 1 percentage point.
For switching over, the only condition is that the customer should not be a defaulter. If so, then he or she can pay the default amount and switch.
Customers have been enquiring about shifting loans to other lenders given the higher rates, and this is one reason why SBI came up with such an offer, the official said.
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