After SBI, ICICI Bank Raises Spread on Home Loans

After the State Bank of India (SBI), ICICI Bank, one of the biggest private sector banks, increased the spread on its home loan interest rates. The bank raised the spread or mark-up over base rate by 10 basis points (100 basis points is equal to 1%) for both women and male borrowers. Sine the announcement made the Reserve Bank of India to cut the basis points rate by 50, the bank slashed its minimum lending rate or more popularly known as base rate by 0.35% to 9.35%. Now, a woman borrower availing loan of less than Rs 5 crores from ICICI bank will have to pay interest at the rate of 9.60% per annum against 9.85% per annum earlier. While male applicants will have to pay 9.65% per annum against the 9.90%.

HDFC, the non-banking financial institution, too has announced benchmark lending rate cut of 0.25% to 9.65% and is offering home loan at same interest rates as ICICI Bank.

This year, the Reserve Bank of India has cut the repo rate by a total 1.25%. Four subsequent rate cuts but banks have reduced their base rate by 60-70 basis points only. Base rate is the minimum interest rate below which a bank cannot lend. Generally, loans are offered at base rate plus mark-up. If a bank reduces its base rate but simultaneously increases the spread on loan rate, the effective reduction in interest rate on home loan will be less.

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