Experts say the quick transmission in this product in a rising-rate scenario should not bother borrowers. “Banks were anyway quick to raise home loan rates in a rising rate scenario,” says Mishra.
All three types of customers — new borrowers, those on SBI’s MCLR-linked home loan, and customers of other banks — need to evaluate this new product. “Borrowers should wait until July 1 to see what spread SBI imposes over the repo rate, and hence what the actual home loan rate for them will be,” says Arvind A Rao, Sebi-registered investor advisor and founder, Arvind Rao and Associates. Rates could vary from one customer to another, depending on their credit profile. “While qualitatively it is a superior, more transparent product, it should also translate into savings on interest cost to be attractive,” adds Rao. He suggests customers should look at their current rates and the cost of shifting, and then calculate if there is a gain to them over the remaining tenure. For SBI’s own customers on the MCLR-linked home loan, there is a one-time 25-bps fee for shifting to the repo rate linked product. “If the interest rate charged by the new product is lower, then it should make sense to shift, especially for those with a larger principal outstanding and a longer tenure remaining,” says Mishra. Chaudhary says borrowers should also be comfortable with frequent rate changes. Usually banks change the tenure and not the EMI. But they also don’t like to extend the tenure beyond the retirement age. If that happens, EMIs can also rise.
Citibank, too, offers a home loan linked to the 91-day treasury bill. “If you have to decide between these two lenders, compare their interest rates. In addition, go for the benchmark that has been less volatile in the past,” says Mishra.