With base rate getting effective from 1st July 2010, a rise in home loan rates seems expected.

There is a possibility that teaser home loan schemes including that offered by State Bank of India (SBI) which offers 8% rate of interest for the first year of the loan and 9% for second and third years might also see a rise as lending below base rate may not be permitted by the banking regulator, RBI.

SBI has hinted that its base rate would be somewhere around 8%. Most banks are infact eyeing SBI's call before setting their base rates. The rate is expected to be around 8.25 to 8.5% for other banks.

The bankers decided in a meeting that they might have to raise home loan rates after the incorporation of base rate. According to a bank executive, the home loan scheme of SBI would be reviewed at month's end when the teaser scheme is set to end.

SBI continued to offer teaser loans to its customers while all other banks came to a halt owing to the surplus liquidity with the bank. However, the surplus liquidity seems to now diminish with banks again accessing the repo window of RBI.