Now Reading: SBI raises home loan rates, conversion fee may cut your savings
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SBI raises home loan rates, conversion fee may cut your savings
SBI raises home loan rates, conversion fee may cut your savings
The Story in Brief
Banks are raising home loan rates after the RBI increased the repo rate by 25 basis points to 5.50% on 7 October. State Bank of India has raised its External Benchmark Linked Lending Rate (EBLR) to 8.15%, effective 15 October, up from 7.90%. Borrowers who want to switch to a lower rate within the same bank face conversion charges that typically range from 0.25% to 0.50% of the outstanding principal, plus 18% GST.
On a 60-lakh-rupee loan, a 0.5% fee would cost Rs 30,000. Experts warn that if a borrower keeps the EMI unchanged after switching, the loan tenure may extend and total interest could rise. For a 50-lakh-rupee loan at 8.25% interest, continuing the old EMI of Rs 41,822 could stretch the tenure to about 21 years and add Rs 4.96 lakh in interest. Borrowers should ask their bank for a conversion quote and compare it with a balance-transfer offer from another lender.
Indian Opinion Analysis
Borrowers who take a lower rate through internal conversion may find their gains erased by the fee structure. The real cost is not the conversion charge itself but the choice the borrower makes about EMI versus tenure. If the EMI is kept unchanged, the interest paid over the full loan term can actually rise by lakhs of rupees, as shown by the 50-lakh loan example. For a borrower who paid the 0.25% conversion fee and then let the lower rate stretch the tenure, the net financial benefit vanishes. The advice from the experts points to a single actionable decision: ask the bank to keep the EMI constant and let the rate cut shorten the tenure, which is where the saving lies. The unresolved point is that most borrowers may not realise that the bank's default will be to extend the tenure, not reduce the EMI.
Source: livemint.com
This brief was synthesised by AI from the source linked above. Methodology and corrections.
