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India's largest public sector bank, State Bank of India (SBI), has increased its home loan interest rates by 25 basis points, making home finance more expensive for new borrowers. The rates—which previously ranged from 7.5% to 8.45%—will now be 7.5% to 8.70%. This move is likely to make home ownership even tougher for many Indians, especially those with lower credit scores.

Key Details

• Who is Affected?
  The rate hike applies only to new loans, especially impacting those whose credit scores are below average. Existing borrowers (with past loans worth ₹8 lakh crore) won’t see changes to their rates.

• Why This Is Significant:
  The hike comes at a time when the Reserve Bank of India (RBI) has mostly been cutting the repo rate to ease borrowing. However, SBI and other public sector banks (like Union Bank of India) have chosen to increase loan rates, widening the gap between lending rates and the benchmark rate.

• Competitor Comparison:

  • Private banks: HDFC Bank starts at 7.90%, ICICI Bank at 8%, Axis Bank at 8.35%.

  • Union Bank: New rates up from 7.35% to 7.45%.

Why Higher Rates?

SBI’s move is based on CIBIL credit scores and the bank’s External Benchmark Lending Rate (EBLR). It’s essentially a response to the low margins banks make on home loans to attract customers, so they’ve decided to increase rates (especially for riskier, low-score customers).

What Does This Mean For Homebuyers?

• Higher EMIs:
  The same principal amount will now attract higher interest, increasing monthly payments for new borrowers.

• Tougher for Low Score Applicants:
  Borrowers with weaker credit scores will now receive less favorable rates, making affordable housing a bigger challenge for many families.

Bottom Line:
Buying a home with a new SBI loan will now cost more. Those with lower credit scores are most affected, potentially pushing them to consider private banks—with higher starting rates but possibly more lenient risk assessment—or waiting until rates fall again.

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