Image Source: ET Realty
India’s home loan market has just felt a ripple: the State Bank of India (SBI), the nation’s largest lender, has announced a hike in its home loan interest rates by 25 basis points for new borrowers this August. This move, coming on the heels of three consecutive repo rate cuts by the Reserve Bank of India this year, breaks the general market trend toward more affordable borrowing and signals a potentially new chapter for housing finance.
What Has Changed with SBI?
SBI has upped its top-end home loan rate from 8.45% to 8.70%, while retaining the lower limit at 7.50%. Effectively, depending on one’s credit score and loan details, new customers will now see rates between 7.50% and 8.70% for standard home loan products. The adjustment most affects borrowers with lower credit scores, who will now contend with some of the market’s highest rates from SBI.
Although the RBI repo rate stands at 5.5% after its latest policy meeting, and the central bank has cut rates three times since February, SBI’s decision may set a precedent for other major public sector banks. Market watchers expect more lenders to eventually mirror this move to safeguard their profit margins.
How Do HDFC Bank, ICICI Bank, and PNB Compare?
As of August 2025, the leading banks are offering these home loan rates for new borrowers:
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SBI: 7.50% to 8.70%
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HDFC Bank: Starting at 7.90%
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ICICI Bank: Starting at 7.70%
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Punjab National Bank (PNB): Starts from about 7.45% to just over 9% for most customers
Other large banks and NBFCs provide the following:
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Axis Bank: Starts at 8.35%, with some products reaching up to 11.90%
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Canara Bank: Ranges from 7.40% to over 10% depending on the borrower’s profile
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Bank of Baroda: About 7.45% to 9.2%
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Bajaj Housing Finance: One of the lowest starting rates at 7.35%
Borrowers with excellent credit, high stable income, and preferred customer status will generally be offered rates at or close to the lower end of these ranges. Those with weaker credit profiles or more complex applications can expect rates closer to the upper thresholds.
Why Are Rates Not Falling, Despite RBI Cuts?
The Reserve Bank of India’s trio of rate reductions this year have yet to fully trickle down into consumer lending rates. Despite a now “affordable” policy rate, public sector banks like SBI have cited pressure to protect profit margins, especially as deposit costs and loan spreads fluctuate. As of now, roughly 60% of all home loans in India are linked to the External Benchmark Lending Rate (EBLR), which is pegged to the repo rate but allows banks a spread based on market realities and credit risk.
What Does This Mean for Homebuyers?
For potential borrowers, comparing rates is now more important than ever. With SBI at the high end for new loans, customers may find better deals with ICICI Bank, HDFC Bank, or certain NBFCs. Loan eligibility, approval speed, and service charges vary, so always check the latest rates and terms from your shortlisted lender before proceeding with an application.
Experts advise negotiating on processing fees, keeping credit profiles strong, and considering fixed versus floating rates in a market that may see further adjustments in the coming quarters.
Sources: Financial Express, Economic Times, Mathrubhumi, Paisabazaar, NDTV Profit
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