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It’s a full-fledged war on home loan front

The interest rate war is here again. The latest one to throw its hat into the ring is HDFC.
Over the weekend, the mortgage leader
announced the revival of its 8.25 per cent teaser rate home loans, which will be valid till the end of August.

Under the extended scheme, HDFC will charge 8.25 per cent rate up to March 31, 2011; 9.25 per cent for the period between April 1, 2011 and March 31, 2012 and the then applicable floating rate for the remaining term of the mortgage, HDFC said in a statement.

“The fixed rates are applicable for all new home-loans irrespective of the loan amount. This special offer is applicable to all new customers who apply before August 31, 2010, and take at least a part disbursement before September 30, 2010,” the lender added.

This has given retail customers a good reason to cheer.

Just two days back, banking behemoth State Bank of India had surprised all by extending its special home and car loans schemes for another three months until September 2010.

These loans are being offered very close to its 7.5 per cent base rate, the benchmark below which the bank can’t lend any more. Indian banking system ushered in a new system of loan pricing from July 1, replacing the earlier much-abused regime of benchmark prime lending rate.

Under the special home loan scheme, SBI is offering a dual product with fixed and floating components. For the first year, the interest rate will be capped at 8 per cent and for the next two years, it will be fixed at 9 per cent for all loans.

After the third year, the rates will revert to floating rates, which is now fixed at 1.75 per cent above the base rate for loans up to Rs 50 lakh, which will be 9.25 per cent at present rate, while it will be 2.25 per cent over the base rate for loans above Rs 50 lakh, where the effective rate will be 9.75 per cent.

Within minutes of announcement of the SBI scheme, another home loan major LIC Home Finance announced a 100 basis point cut in its home loan rate in keeping with the changed market environment, and offered three different products with interest rate 100 basis points lower.

LIC Housing Finance is now offering floating interest rate for new customers on home loans up to Rs 1.50 crore at 8.75 per cent. Earlier the special offer rate for loans above Rs 75 lakh up to Rs 1.50 crore was 9.75 per cent.

For those opting for short-term fixed rate, LIC Home Finance offers loans at 8.90 per cent fixed up to March 31, 2010 for loans up to Rs 1.50 crore and, thereafter, the prevailing floating rate will apply.

The earlier rate of interest for loans above Rs 75 lakh up to Rs 1.50 crore was 9.90 per cent.

For customers wanting fixed lending rate for a considerable long period, LIC Housing Finance has fixed the lending rates at 9.25 per cent for five years and thereafter on floating basis.

HDFC said while the fixed rate will remain the same irrespective of the loan amount, the floating rate will vary with the loan amount. Under this offer the floating rates have two slabs – loans up to Rs 30 lakhs where the rate will be 9 % and above Rs 30 lakhs where the rate will be 9.25%.

It said the existing floating rate product continued without any change where the rates applicable are 8.75% for loans up to Rs 30 lakhs, 9% for loans between Rs 30 lakhs and Rs 50 lakhs and 9.25% for loans of Rs 50 lakhs and above.

The special interest rate under DRHL-3 is available to the NRI and PIO customer segments too.

The self-employed customers can also apply under the DRHL-3 and avail the same special interest rate offer, a bank’s press release said.

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