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Our Bureau

Mumbai, Dec. 19 Concerned about losing business to public sector banks, which cut interest rates on home loans earlier this week, leading housing finance companies – HDFC and LIC Housing Finance – lowered their lending rates on Friday.

HDFC has reduced its Retail Prime Lending Rate by 50 basis points and introduced two slabs – up to Rs 20 lakh and above Rs 20 lakh – for floating interest rate home loans.

HDFC, India’s largest housing finance company, will offer floating interest rate home loans of up to Rs 20 lakh, and above Rs 20 lakh at 10.25 per cent and 11.25 per cent respectively with effect from December 22. Public sector banks had reduced their rates to 8.5-9.25 per cent earlier this week, for home loans up to Rs 20 lakh.

Currently, HDFC, irrespective of the quantum of home loan, charges an average floating interest rate of 11.75 per cent.

The 50 basis points reduction in HDFC’s retail prime lending rate (RPLR) to 14.5 per cent will also benefit the existing borrowers. Since all floating rates are linked to RPLR, existing borrowers, depending on their profile, will now pay interest rates between 11 and 12.25 per cent, that is, 225-350 basis points below RPLR of 14.5 per cent.

“We have been able to bring down our costs due to improved operational efficiency and good quality portfolio,” said Ms Renu Sud Karnad, Joint Managing Director, HDFC.

Comparatively, LIC Housing Finance, which cut interest rates on home loans with effect from December 17, is offering floating interest rate loans a tad cheaper. A home buyer can avail himself of loans up to Rs 20 lakh for five-year tenure at 9.25 per cent. Loans of more than five years duration are available at 9.75 per cent.

For loans above Rs 20 lakh, LICHF floating interest rate home loans will vary in the 11-11.25 per cent range, depending on the profile of the customers.

Before the revision, the company had an uniform lending rate of 11.5 per cent irrespective of the amount and the duration.

“We are expecting our cost of funds to come down as we should get funds from the National Housing Bank through the refinance window at cheaper rates,” said Mr R.R. Nair, CEO, LIC Housing Finance.

Meanwhile, Bank of Rajasthan announced a reduction of up to 150 basis points on fresh loans of up to Rs 30 lakh with effect from December 22.

The lowest floating interest rate being charged by the bank is 10 per cent (11.50 per cent as of now) for loans of up to five years and the highest floating interest rate being charged by the bank is 11.50 per cent (12.50 per cent) for loans above 15 years and up to 20 years.

Union Bank has decided to reduce its deposit rates across various maturities by 50 to 150 bps with effect from January 1, 2009.

The maximum interest rate will be capped at 8.75 per cent a year for the term one year and above.

The bank has floated a deposit scheme for retail investors at 9.35 per cent a year for enabling them to double their investment in 90 months.

HDFC too has reduced interest rates on deposits across all maturities by 50 basis points with effect from December 23.

A 15-month deposit (annual income plan) of up to Rs 1 lakh will now fetch 10.05 per cent interest.

More Stories on : Housing Finance | Interest Rates | Housing Development Finance Corporation Ltd

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