The Hindu Business Line : Banks, HFCs in no hurry to hike home loan rates

A HIKE in home loan rates is not currently on the cards for banks and housing finance companies. Most of them are taking a wait-and-watch approach to the recent rate hike by the two big players, ICICI Bank and HDFC.

On Thursday, HDFC and ICICI Bank increased their lending rates for home loans by half-a-percentage point. The floating rates of both ICICI Bank and HDFC now begin from 7.75 per cent. The fixed rate for ICICI Bank begins from 9 per cent, while for HDFC it begins from 8.75 per cent.

Bank of India, which hiked the rates in November 2004 for new loans, will see where it stands and then decide, said Mr P.P. Jain, General Manager, Retail Banking and Public Relations. "Our cost of deposits are low and we have plenty of sources to raise funds. So, there is no pressure on us to raise the interest rates on the home loans."

Currently, Bank of India charges 7.5-8.5 per cent for floating rate and 8.5-9.25 per cent for their fixed rate.

Only banks that have a problem of liquidity would hike lending rates, said an officer from Central Bank of India. "Only if we increase our deposit rates by 20-25 per cent will we have to think of raising our lending rates. As of now we have no liquidity problem, so we are not thinking of raising the home loan rates."

In 2003, Central Bank of India had reduced home loan rates by 100-150 basis points, he added. As of now, the bank charges 8-9 per cent for the floating rate and 8.5-9 per cent on the fixed rate.

LIC Housing Finance, too, is only reviewing the situation and has no immediate plan to hike rates, said its Director and Chief Executive, Mr S.K. Mitter. "It all depends on our annual results, which are expected to be declared soon. Until then we have no plans to hike the rates."

LIC, which last hiked rates about 8-9 months ago, currently charges 8.5 per cent for their fixed rate and 7.75 per cent for their floating rate.

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