Home loan rates likely to rise

Home loan rates are expected to rise as the base rate regime comes into effect from July 1.

Teaser home loan rates of some banks, including State Bank of India (SBI), which charges only 8 per cent for the first year may rise, as Reserve Bank of India (RBI) has not allowed banks to lend below the base rate. While SBI indicated that its base rate is likely to be around 8 per cent, for others banks the rate will be 8.25-8.5 per cent. SBI will announce its base rate before June 15.

In a meeting held last week, bankers have discussed the issue and are of the opinion that they have to increase their home loan rates. The home loan scheme of SBI will be reviewed by the end of the month, as it was extended till June 30, a bank executive said.

Country’s largest lender, SBI which pioneered the concept of teaser rate last year and forced others to follow suit, had earlier said the fixed-cum-flexible scheme was launched as the bank was having huge liquidity following the global financial crisis. However, now the surplus liquidity is no longer there as the banks started to access the repo window of RBI since last week.