In recent past, some of the readers of this blog posted queries on a switch from Base Rate to MCLR (Marginal Cost of Funds based Lending Rate). The queries were similar in nature i.e. credit/loan manager of the bank suggested them to shift from base rate to MCLR. These are the borrowers who availed home loan before 1st April 2016 linked to base rate. The home loans availed on or after 1st April 2016 are by default linked to the MCLR. Therefore, this post is relevant only for borrowers whose home loan is linked to the Base Rate of the bank.
It is observed that the loan manager of the banks including PSU banks is misleading the borrowers whose home loan is linked to the base rate. In 1st stage, the bank employees are suggesting borrowers shift from base rate to MCLR through comparison. I suggested the readers of the blog to counter question how MCLR is beneficial compared to base rate? Trust me not even a single bank employee was able to explain or justify. The common answer was that MCLR is less than the Base Rate of the bank but the big question is whether the bank is passing the benefit to the borrower? Let me answer in the following section.
NO Immediate Financial Benefit to Switch from Base Rate to MCLR
Let me share the example of one of the readers of this blog Mr. A. Last year, he availed home loan from PSU Bank at 9.55%. The base rate of the bank was 9.30% and there was a markup of 0.25% on base rate. Now the bank is insisting Mr. A shift from Base Rate to MCLR. The sales pitch for this switch is to take advantage of low Marginal Cost of Funds based Lending Rate. The MCLR of the bank is 9.10%. Therefore, Mr. A is under impression that post switch, his home loan interest rate will decrease from 9.55% to 9.35%. In other words, the difference of 0.20% between Base Rate and MCLR will be passed to Mr. A.
Unfortunately, it is NOT CORRECT Understanding. To clarify, the home loan interest rate of Mr. A will remain the same after a switch to Marginal Cost of Funds based Lending Rate. Assuming Mr. A decides to switch. His markup or spread will increase to 0.45% from 0.25%. Therefore, home loan interest rate will be MCLR + Markup i.e. 9.10% + 0.45% i.e. 9.55%. To summarize, there is NO Immediate financial benefit to a borrower if he/she decide to switch from Base Rate to MCLR.
Why Banks Are Forcing Existing Home Loan Borrowers To Switch to MCLR?
If the bank is not able to trap the borrower by comparing MCLR and Base rate then the next strategy is to create a fear. In one of the instance, a bank employee told the reader of this blog that if she does not switch to MCLR now then in near future all the borrowers on base rate will be migrated to Marginal Cost of Funds based Lending Rate by default. To clarify, the bank is misleading the borrowers. The borrowers on base rate may continue base rate as benchmark rate until the end of the home loan period. Bank cannot forcefully migrate the borrowers from base rate to Marginal Cost of Funds based Lending Rate. In other words, the bank is forcing borrowers to migrate. You must be wondering WHY? let’s check out.
1. Anticipation of increase in Interest Rate:
As i shared in my earlier posts on Marginal Cost of Funds based Lending Rate that MCLR will be more beneficial during decreasing interest rate. On the other hand, the base rate is financial beneficial during increasing interest rate. This understanding is from a borrower’s perspective.
From bank’s perspective, the reverse theory is beneficial. The reason being, interest rates will increase faster under MCLR compared to the base rate. Therefore, higher interest rates mean high profitability/margins for the banks.
The experts are of the opinion that interest rates have bottomed out. The interest rates and inflation move in tandem with each other. In recent past, the inflation started increasing, therefore, RBI will not be able to hold the low-interest rates if inflation moves beyond 6% i.e. upper range set by the RBI. Therefore, in anticipation of an increase in interest rates, banks are forcing borrowers to switch to MCLR linked home loan. Whereas it is more beneficial for the borrower to stick to base rate if interest rates start increasing.
2. MCLR linked Home Loan is a sort of Fixed Interest Rate Home Loan:
In my post, New Lending Rate – 5 Loopholes RBI should have fixed i shared that under MCLR reset date for the interest rate is max 1 year. In fact, one of the largest home loan providers link the home loan interest rate to 1 Year MCLR, therefore, interest rate reset date is One year. What it implies is that the interest rates will not be changed for one year. In short, the home loan becomes fixed interest rate home loan with reset period of one year. Normally, the fixed interest rate home loan reset period is 3 years.
Fixed interest home loan is always beneficial for banks as it provides stability to the loan portfolio of the bank. Now you must be wondering this is good for the borrower, if the interest rate increase as i shared in point no 1. I agree it is beneficial for borrower but only in short term (max up to 1 year). Hypothetically, if today my interest rate is 9.5% under base rate. I migrate to MCLR at the same interest rate. During next 1 year, interest rates will increase to 10.25% under MCLR but i will be paying only 9.5%. So far so good :)
Suddenly after 1 year, my interest rate will increase to 10.25%. Whereas under base rate, the interest rate might be somewhere around 9.85% as per my estimate. Let say, interest rates remain stable for next 2 years. Now to find out which option is more beneficial. You can calculate savings of 0.75% for one year under MCLR and savings of 0.40% for 2 years minus 0.35% extra interest for 1st year with 3 months interest reset period.
As per my calculations, home loans linked to base rate will be more beneficial. Though it is subjective and may vary from case to case basis. Over a long term, the base rate will be definitely financial beneficial in case interest rates are increasing. On the contrary, MCLR is beneficial during softening interest rate cycle.
Misconception:
In few cases, banks told borrowers that they can switch back to Base rate from MCLR in future. Just to clarify, it is not correct. The migration from base rate to MCLR is irreversible. Due to low MCLR compared to base rate the borrower think that bank is doing a favor to him/her. In my opinion, it is otherwise :).
Words of Wisdom:
Any switch from base rate to MCLR will have a financial implication for the borrower. Therefore, it is advisable to take this decision only after proper research and financial calculations. Just based on the suggestion of a loan manager or credit manager you should not decide. You may question the bank to share the pros and cons of this switch. If the bank is not able to answer then it is visible that bank employee is bluffing around and you may continue with Base Rate.
Copyright © Nitin Bhatia. All Rights Reserved.
Hi Nitin,
Que : 1 I have availed home loan from ICICI Bank 2 years ago, I have preferred borrowing loan from bank instead HFCs as I was regular reader of your blog and I was aware of pros & cons of base rate over BPLR. Today when logged into my ICICI internet banking site and checked the my loan account. I was surprised to see.
FRR/PLR 9.3
Variance 0.15
am I not on base rate? how to confirm?
Que 2: Is MCLR just another name of BPLR?RPLR? will it have similar implications on borrowers?
Que 3: I have not been contacted yet for any such migration. will bank contact every individual for this?
1. Your home loan is linked to base rate of the bank. ICICI Bank refer it as FRR (Floating Reference Rate) or PLR (Prime Lending Rate)
2. BPLR/RPLR, Base Rate or MCLR are various reference rates on the basis of which the home loan interest rate of the customer is decided. All these reference rates are calculated differently.
3. No. I have not mentioned this.
Thanks a lot Nitin for your prompt response as always and clarifying my doubts.
Hi Nitin,
Regarding the move from base rate to MCLR, you have mentioned above that from the base rate+spread of 9.55% if the customer opts to move to MCLR of 9.10% his final rate remains the same at 9.55%. Why would the markup increase to 0.45% randomly? Does it not depend on the 1 year spread the bank has currently? Say if the MCLR markup is 0.25%, customer will get the new rate of 9.35% correct?
I believe one of the main reasons banks are forcing their customers to move to MCLR now is because so far the MCLR has not fallen as much as the Repo rate cuts. But it might fall in the coming months. So banks are attempting to lock slightly higher rates for their base rate customers who might anyway decide to move may be 6 months later when MCLR has fallen more.
I have noticed in the past few months one prominent private Bank has increased the spread as they reduced the 1 year MCLR effectively keeping the interest rate same. What this means is in the rising rate scenario, customer will have to shell out a lot more due to the higher spread on the MCLR.
If the base rate is not reduced by the banks in tandem with MCLR, then the customers will be forced to move to MCLR rates because there is 1) they will be paying more now 2) there is no guarantee that base rate will remain the same in the rising rate scenario. So why not move to lower rates now and take whatever comes later.
1. It is not correct. The interest rate will remain same and markup will increase.
2. In my opinion, the interest rates have bottomed out.
3. Every bank’s MCLR is different therefore we cannot generalize to switch to MCLR with lower spread.
4. As i shared in my post that there is no immediate financial beneficial to shift to MCLR from base rate. Moreover, the option to switch to MCLR is always open for borrowers whose home loan interest rate is linked to base rate. They have nothing to lose at this stage.
For 1) Why would a bank not offer their current MCLR+Spread to its customers? If they don’t, then there are always other banks which will offer that when they transfer the loan. I am sure there are people who pay close to 10% interest for their loans taken 3 or 4 years back. SBI offers loan at 9.3% today (lowest) and it makes a lot of sense for people to move on. Base rates was anyways not working in favor of the customers.
2) Even though I don’t have too much faith in the banks, they still have some scope to reduce the rates and RBI also seem to be in a mood to reduce further. So if the NPAs remain stable I think we can see another 0.1 to 0.15% rate cut by banks. I just feel we will probably have 1 or 2 years of current lower rates, so better to make use of it.
No way to predict what happens after 1-2 years.
A borrower can pay conversion fees to reduce home loan interest rate instead of balance transfer.
Looks like 0.15% cut has been announced by SBI. So if all goes well then the new rate will be 9.15% from 1 Nov. Great news for new borrowers and good option for existing customers to switch after checking their new rate and cost of switch.
Nitin Sir, Is it possible that consequent to demonetisation, interest rates would fall further !
It is possible. Right now no one knows the full impact of demonetisation.
Should I transfer my Hdfc Ltd home loan(9.70%) to India bulls home loan(9.35%) with 0 processing fees?
First you should approach HDFC Ltd to reduce your home loan interest rate. They may charge conversion fees and reduce your home loan interest rate. Balance transfer should be last option.
Thank you sir.
you could also argue with them to not charge conversion fee by saying that you want to transfer loan. One my friend transferred loan to SBI and HDFC guys were ready to give waiver to him for not transferring his loan.
Thanks for the post Nitin. But I am still confused. It would be great to have real example.
SBIs Base Rate is 9.3% and spread is 0.25% (Effective Interest Rate of 9.5%)
SBIs MCLR is 8.9% and spread is 0.25% (Effective Interest Rate of 9.15%)
Isn’t switching to MCLR advisable in this case?
As i explained in my post that if you switch to MCLR your interest rate will remain the same. Therefore it will be MCLR + 0.6% spread in your case i.e. 8.9% + 0.6% = 9.5%. As i explained in my post that there is no immediate financial benefit. Therefore, you may continue with Base Rate.
Thanks for sharing the info.
I would also like to hear your views on ICICI Bank Home Overdraft scheme.
Banks revise base rate but as i explained any movement in base rate will be slower compared to MCLR. In my opinion, you should continue with base rate.
I will share a post on ICICI Bank Home Overdraft scheme.
Hi Nitin,
Thanks for this insight.
Do you know if i can still move to some lower base rate to some other bank as I hv icici home loan on base rate?
Thx,
Nitin
It is not feasible. Any switch will be on MCLR. You may check with SBI if you decide to switch home loan.
Thanks Nitin.
Hi Nitin,
This is second time I am posting my question here. Earlier, on HLPP I had posted my question and got it lot of clarity.
I have transferred my loan from AXiS bank to SBI – Max Gain. The AXiS was charging 9.35% interest rate(base rate linked). Now, the loan with SBI- Max Gain with 9.25% interest rate(MCLR) and 0.10% is for OD(maintaining over draft account).
I have transferred this loan for below reasons.
1. Get the benefit of OD account (max again). Which help to save interest.
2. Home Equity Loan. I got it sanctioned too with transfer (with 9.25%).
3. SBI home loan interest rate are always lower compare to another banks.
4. SBI is more like Nationalized Bank and will NOT have cash crunch to trouble the borrowers when financial crisis occurs.
I would like to have your suggestions and inputs regarding the same briefing pros and cons for each reasons as listed above.
Thanks,
Ravindra Rathod
The answer to your question will require detailed financial calculation considering the loan amount, cost of transfer, amount you would like to keep in OD account, future prepayment plan etc.
Prima facie, i don’t foresee too much financial benefit.
Home Loan Amount : 31.60 Lakhs
Home Top Up Loan : 3.5 Lakhs
cost of transfer(including Property insurance) : 26K
Plan to keep amount in OD is : 3-5 lakhs
Future Prepayment : Depends on the bonus and excess amount left with me but I will first pay off Home Top Up Loan
You may download EMI calculator available on this website to do cost benefit analysis.
we were hoping for another rate cut of 0.5 to 1% in 1st week of Dec and it didnt happen thanks to demon.Next one,if all happens,would not be more than 0.25%.On the other hand,there is risk of a rate jump due to anticipated short term econmic decline (due to demon in India) and due to trump factor globally ! It seems the short lived low interest regime is over and better dont switch over to MCLR !
SBI has reduced MCLR by 0.9%. Will this also bring down base rate? If a customer moves from base rate to MCLR, will there be any charge by the bank for switching?
my understanding is that SBI has already reduced the Base Rate by a ‘whopping’ 0.05% ! Cant say when it gets reflected in the loan book !
As i explained in my post, MCLR is more responsive to interest rate compared to base rate. Base rate will take time to come down and banks will prefer customers to be on MCLR rather base rate therefore initial base rate cut will be minuscule. You can expect more base rate cut in coming months.
You should only compare net benefit rather comparing cut in base rate with MCLR. Secondly, as i keep highlighting in my posts that base rate will not move as sharply as MCLR. It has its own advantages and disadvantages.
“We recommend borrowers to move to MCLR regime,” she said, adding that if an existing borrower under the base rate regime wants to switch without changing the loan spread, then it does not require any fee. “However, if one wants the full benefit of the MCLR rate, then the switch over fee needs to be paid,” she explained. This was SBI Chairman’s article in Financial Express today. Cant understand the meaning of “switching without changing the loan spread” !
Tomar, its not “switching without changing the loan spread”. It is “switching without changing effective rate of interest”. This means, your ultimate rate of interest will remain same even after the switching but the spread which is added to the base rate will be increased to match your existing rate of interest.
Illustration: If an existing customer with loan amount of ₹ 2.5 million is at 9.55% p.a. effective ROI (I-Base + 0.20%) and if the customer opts to switch-over to I-MCLR-1Y then the Adjustable Rate Home Loan (ARHL) interest rate will become (I-MCLR-1Y (9.15%) + spread (0.40%)) equivalent to 9.55% p.a..
Thus, the effective rate will continue to remain same at 9.55% p.a. with spread applicable on the loan being adjusted.
Just observe, the spread changed from 0.20% to 0.40% :-).
Hope it helps!
You mean that the interest will remain unchanged for another reset period(1 year in case of SBI) with out paying a conversion fee, at the same time you are not getting any benefit of decrease in interest rate during this period !
Your understanding is correct.
Can you support your quote by citing some doc? It is “switching without changing effective rate of interest”
Has SBI released a circular?
The switch from base rate to MCLR is based on the request of a borrower. Therefore, the terms and conditions are mentioned in the letter issued by the bank. The bank will not issue any circular in this regard.
Your home loan interest rate will remain same if you don’t pay conversion fees at the time of switch from base rate to MCLR. Under MCLR the reset period is 1 year therefore interest rate will be locked for next 1 year.
It is very well explained by Santosh in trail comment.
Sir,we were hoping for another rate cut of 0.5 to 1% in 1st week of Dec and it didnt happen thanks to demon. How ever in January SBI has announced a hefty rate cut of 0.90% ,again thanks to excess liquidity due to demon. But by increasing the spread on home loans,SBI has limited the actual rate cut to 0.50%.This means all new home loan borrowers would pay 8.65% to 9.00% from January 2017(9.00% for a Max gain customer above 75 lacs of loan) as per the SBO corp. website. My current home loan rate is 9.40% on Base Rate regime, which may come down by a mere 0.10 to 0.20% eventually if I continue in the Base Rate. So is it worth while to pay a conversion fee of Rs 32,500 and switch over to the new MCLR rate of 9.00% immediately for a saving of 0.35% interest ! My outstanding loan amount is about 65 Lacs for 25 years and the EMI has just begun. Also SBI has indicated that the new rate will not be reversed immediately even if liquidity falls and actually could come down further due to competition !
To be honest with you it might or might not be financially beneficial depending on balance outstanding, balance in max gain account, tax benefits availed etc. Therefore, i suggest you to do cost benefit analysis before taking any decision in this regard. There is no standard answer to your query.
Hi Nitin, My outstanding housing loan with Axis bank is Rs.15,15,747 with remaining 27 EMIs to be paid at Rs.64,504. My current interest is 9.25%. Bank is offering 8.87% MCLR and I need to pay a nominal charge of Rs. 7,500 + service tax. Would it make sense for me to switch to MCLR at this point or choose to stay with base rate? Please help.. Thanks
I don’t think so. You may continue with existing interest rate as your home loan is nearing completion and balance tenure is just 27 months.
Thank you Nitin. This helps..
HI Nitin,
My outstanding housing load with SBH is 16,35,000 on Baserate interest of 9.7% pa with 15 Years tenure. Bank is offering MCLR of 9.0% with payment of ~10000. Would it be advisable to switch to MCLR at this point? Please clarify?
Exact details:
Loan Outstanding amnt : 16.5 L
Tenure : 240 Months
Current Base rate: 9.7
MCLR : 8.75 (till Mar31, Zero Spread )
Conversion Charge: 6542 Fixed.
Please advice its right to switch over to MCRL.
You may shift but just check the negatives of MCLR as i highlighted in my posts on same topic.
Nitinjee, but doesnt the figure 8.75% include a spread of 0.75% because SBI MCLR is 8% ?
His loan is from State Bank of Hyderabad and SBH 1 year MCLR is 8.75%. Therefore, it is correct that spread is Zero.
Sorry Kumar, but doesnt the figure 8.75% include a spread of 0.75% because SBI MCLR is 8% ?
Hi Nitin,
My outstanding housing loan with Syndicate bank in 15,39,000 on Base rate of 9.6% with 19years tenure remaining. Syndicate Bank MCLR is 8.7%. Is it be adviasable to switch to MCLR.
You may shift but just check the negatives of MCLR as i highlighted in my posts on same topic.
Hi Nitin,
My outstanding home loan with SBI is 42 lakhs. Currently paying 9.5% ROI, remaining tenure 12 years. If I switch to MCLR, ROI will drop to 8.7%.
Is it beneficial to switch?
You may switch but please check negatives of MCLR as i shared in my posts on same topic.
Hi Nitin,
I have an outstand loan of 15,57,000 /- with SBI. at ROI 9.3%. and I am paying an EMI of 26,000 every month. Now does it benefit me to switch to MCLR with ROI 8.65% with same EMI of 26,000?
Thanks,
Pavan
You can do cost benefit analysis before any decision in this regard. Also check the pros and cons of MCLR as i shared in my posts.
I dont understand the calculation of having same interest rate you mentioned at the very top of this article…. how come interest is same as 9.55% whereas underMCLR it is 9.35% keeping spread as 25 …. bank is not going to increase the spread when you switch over to MCLR, right ? for example in SBI MCLR is 8 and spread is .65 … earlier it was .25 … so it is still beneficial wrt the base rate of 9.5 ( 9.25 + .25 spread)… please clarify
If you switch from base rate to MCLR then the spread offered will be 1.5% not 0.65%. To opt for lower spread of 0.65% under MCLR you need to pay a re-writing fees as demanded by the bank.
Hi Nitin
My current home loan outstanding amount is 23.5 Lakh with Axis Bank having ROI 9.25% of 15 years tenure. I’m paying EMI of 26K every month since last one and half year. Bank is offering me two different rate to convert from base rate to MCLR.
8.65 – MCLR rate with 0.50% markup
8.15 – MCLR rate with 0% markup
Revised cycle for Axis MCLR rate is 6 month
They are charging 0.50% of current outstanding + Service tax to convert into MCLR.
Actually I don’t understand why bank is giving me such 2 different rates instead of giving only one effective smaller rate. Also, I don’t understand the actual term of Markup. Difference between current base rate and MCLR (with 0% markup) is ~1.10% that will help me much to reduce number of EMI ~10 to 12.
So, In your view, Should I switch to MCLR or continue with existing base rate (9.25%)?
Please clarify.
Thanks,
I am not sure how bank is offering 2 different interest rates. You should immediately grab 8.15% offer.
yes exactly as spread is ZERO which is very ideal condition
@ Chirag,will you pl clarify if the offer is 8.65% with out Conversion Fee and 8.15% with Conversion Fee !
In both the cases Bank personal asks to pay Conversation Fee (i.e. 0.50% of outstanding amount + service tax)
Do let us know about final decision !
So Chirag, finally it is 8.1% or 8.65% !
Hi Nitin,
I have home loan with SBI – max gain.
Loan outstanding – 11Lakhs
Outstanding Tenure- 5years
Current EMI: 23500
Base rate: 9%
Loan Spread: 0.25%
Planning to close this loan in next 2Years.
As per current MCLR- 1 year MCLR, effective rate 8.80% p.a.
Please suggest if switch to MCLR will be beneficial.
Thanks
Prashant
You have not mentioned the conversion fees to be charged by the bank.
Hi Nitin,
I have home loan with SBI – max gain.
Loan outstanding – 24Lakhs
Outstanding Tenure- 18years
Current EMI: 25500
Base rate: 9%
Loan Spread: 0.25%
As per current MCLR- 1 year MCLR, effective rate 8.80% p.a.
conversion fees will come around Rs. 9832. What is your recommendation..? Should I go for MCLR conversion.
Recently SBI cut the base rate. You can negotiate for Base Rate with 0% loan spread instead of shift to MCLR.
Hi Nitin,
I have home loan with UCO Bank of 22 Lakh from March 2016.
Loan outstanding – 21 Lakh
Current EMI: around 21 Thousand
Interest rate: 9.7%
As per current MCLR- 1 year MCLR, effective rate 8.8% p.a.
Bank is asking 1% charge for changing Interest rate from 9.7 to 8.8.
Please suggest if switch to MCLR will be beneficial? Or i should do Balance Transfer.
Thanks
Sachin
You may check the similar offer if you would like to continue with Base rate.
Hi Nitin,
i have a home loan of Rs. 27,30,000/- from SBI Maxgain and the interest is on base rate i.e. 9.5%. and the balace tenure is 226 months.
SBI is offering to change it to MCLR @ 8.8% with a charge of Rs.9000/-
Bank Of Baroda is offering to overtake the balance at MCLR of 8.35%(with zero spread) and the cost of transfer will be around 12-15k.
BoB MCLR reset period is one year.
request your advice on shifting the loan to BoB.
thanks
Zulfi
You may shift to Bank of Baroda provided your credit score is good. The interest rate in Bank of Baroda is linked to credit score.
Hi Nitin,
I have SBI Home loan with interest rate of 9.35, Is it better to shift to MCLR which is around 8.10%
Hi Mr Suresh, I thought the lowest SBI mclr rate is 8.6% currently. Pls correct me if I am wrong here !
You may shift but i am assuming your balance home loan tenure is more than 5 years.
Thanks Nitin for reply, my tenure is 13 plus years
You may pay transfer fees and reduce your home loan interest rate.
Hi Mr Nitin, I thought the lowest SBI mclr rate is 8.6% currently. Pls correct me if I am wrong here !
You are right but it is interest rate not MCLR. MCLR is 8%.
Hi Nitin,
I have 24 lacs loan SBI max gain with 9.45% interest rate. Not sure this is MCLR based or not. This loan is taken in Sept 2016, so it should be MCLR based, correct? Now bank is asking 10K to change interest rate to 8.8%. I got other option from HDFC, they are saying with 5K MOD amount only will transfer the loan at 8.5% interest rate. What is you suggestion, is it good to go for HDFC or stick to SBI? I read comment and found that Band of Baroda gives loan based on credit rating. So I should try there as well.
Thanks,
Brijesh.
The answer require detailed financial calculation. Prima facie, if you are taking advantage of maxgain facility then you should continue with the same & pay the conversion charge to SBI to reduce home loan interest rate under maxgain only.
I have home loan with IDBI Bank.
Loan Taken – July 2011
Loan Amount – 25L
Loan outstanding – 22 Lakhs
Outstanding Tenure- 12 years
Current EMI: 25000
Top Up : 15L
Outstanding:14.5L
Linked with base rate:9.5%.
Base rate: 9.5%
Loan Spread: 0.0%
MCLR : 8.80% for 1 Year
Ques: What would be my interest rate for next 1 year? will it be 8.8% or 9.5%?
Please suggest, should i go for MCLR?
Regards
Rahul Singh
If you switch to MCLR, your interest rate will be 9.5%.
Hi Nitin,
I have SBI Margain home loan of Rs 32 lacs @ 9.3% (after recent rate cut) for the tenure of 30 years.
I have taken loan on 30th March 2016 just before the start of MCLR era.
Bank is asking for switching fee of approx 13000 for shifting to MCLR.
Should I covert to MCLR or not?
Or Should I wait till SBI reduce their markup on MCLR and then shift?
Regards
Devdatta
You have not mentioned the revised interest rate offered to you after payment of switching fee.
I have home loan with GIC housing finance fixed home loan 240 months and 9.95 interest rate, i have ask my bank to switch my home loan to sbi for lower interest rate. The bank person are telling that you have to pay 60000 + service tax + surcharge to switch your home loan.
Is this true… can a bank charge this much money for just switching home loan. somebody please guide me…
Hi nitin,
We had home loan from SBI under name of my mom as 1st applicant and dad as CO applicant in base rate linked interest rates in Dec 2013 for 13 lakhs and tenure is 15 years ..as of now I enquired bank they said rate of loan is 9.2% which is much above all slabs of mclr rates..and simply they said all loans of customers are automatically changed to mclr and no need to pay service change et all..I am not understanding ..is we have change it by paying service charge or it will change automatically if changes to mclr linked interest rates then why our rates are much higher ?