SBI to keep home loan rates steady till March,cuts deposit rates

In a big relief to home buyers,State Bank of India (SBI) has decided to keep the interest rates on home loans unchanged for the next five months....

In a big relief to home buyers,State Bank of India (SBI) has decided to keep the interest rates on home loans unchanged for the next five months. However,the countrys largest bank has slashed deposit rates on various maturities by 25-50 basis points with effect from November 9.

The bank has decided to extend the availability of My Home Campaign till March 31,2010. Three home loan products are offered under this banner. These products were originally launched on August 8 for a limited period of three months. Owing to the success of the schemes in reviving interest in the residential real estate sector and to help more customers to avail the benefits,the offer has been extended till March 31,2010, the bank said.

In other words,this could mean that home loan rates are likely to rise after March 2010. SBI will get a clear picture about the Reserve Bank of Indias plans on the rate front by that time. The RBI had withdrawn several short-term refinance facilities and hiked the statutory liquidity ratio (SLR) in its recent credit policy announcement. It was talking about an exit from the current accommodative policy in the near future.

The policy statement signals that rate hikes are imminent. It will hike the reverse repo rate at its next policy meeting in January 2010. We expect a cumulative increase in effective policy rates of 300 bp in 2010, said Goldman Sachs India vice-president and chief economist Tushar Poddar.

Under the SBIs scheme,loans up to Rs 5 lakh with a maximum tenor of 10 years carries a fixed rate of 8 per cent for 5 years. Loans above Rs 5 lakh and up to Rs 50 lakh carries fixed interest rate of 8 per cent pa during first year and 8.5 per cent pa (fixed) during the 2nd and 3rd year of the loan. Customers looking for high-end properties can take SBI Advantage Home Loan which carries fixed interest rate of 8 per cent pa during first year and 9 per cent pa during the 2nd and 3rd year.

With the SBI extending the package for another five months,other public sector banks are likely to follow suit. Another reason for the SBI move to keep the home loan rates is the intense competition in the segment. Private sector lender Axis Bank on Thursday introduced a special home loan scheme with a lower interest rate of 8 per cent for a limited period.