Published on: Nov 4, 2016 @ 16:12
ICICI Bank and HDFC have reduced home loan interest rates by 0.15 per cent up to a loan amount of Rs 75 lakh. Competition in the home loan business has begun since State Bank Of India (SBI) had reduced its rate by 15 bps early this week.
Following the rate cut of 0.15% by SBI this week, ICICI Bank and HDFC have reduced interest rates by 15 bps (100bps = 1 percentage point) for home loan borrowers.
ICICI Bank on Thursday lowered the interest rates on home loans by 0.15% up to a loan amount of Rs 75 lakh. Following which home loans for women borrowers will be 9.15% from the earlier rate of 9.30% and 9.20% from the earlier rate of 9.35% for other customers. The new rates are effective from 1 November and valid till November 30.
India’s largest mortgage lender HDFC, too announced a rate cut in its home lending rates by 15 bps. HDFC’s home loan up to Rs 75 lakh for women borrowers will now attract an interest of 9.15% and, for others it will be 9.20%, effective from November 4. The Interest rate for loan amount beyond Rs 75 lakh has been revised downwards to 9.25% for women borrower and 9.30% for others.
Reserve Bank Of India had reduced its key lending rate by 0.25% to 6.25% after the monetary policy review on October 4. Thereafter, ICICI bank also reduced its benchmark one-year marginal cost based lending rate (MCLR) to 8.95% from 9.05% on 28 October. Now, ICICI bank has also reduced the spread over MCLR to 20bps as against 35 bps earlier.
Moreover, these leading banks have offered a lot of benefits such as waiver of processing fees by SBI and overdraft facility by ICICI Bank. ICICI Bank has announced to launch a credit facility ‘ICICI Bank Home Overdraft’ against home loans for salary customers. It offers them credit from Rs 5 lakh to Rs 1 crore against property owned by them. The product offers dual advantage of a term loan as well as an overdraft facility.
“While the term loan provides customers with quick funds for immediate needs, the overdraft facility offers them the flexibility to access funds instantly for expenses , as and when required”, the bank had said in its statement.
Those buying the overdraft loan from the bank would be able to utilize the funds for their personal needs such as for education, medical treatment, home renovation, marriage and overseas travel among others.
Beginning from a minimum of Rs 5 lakh to a maximum of Rs 1 crore, customers will have the facility to avail a minimum 10% of the total amount as term loan and maximum 90 % as overdraft.
ICICI Bank said the interest on term loan would be charged as per the equated monthly installment, while on the overdraft the charges will be only on the utilized amount for the period the funds are used.
According to experts, since there is low credit demand from corporate sector, most of the banks are focusing on retail loans, especially the home loan segment as it seems to be the safest growth option for them.
According to analysts, the rate reduction effected by large players would put pressure on others to follow suit to remain in the competition. The move of the private sector lender’s can be seen as a response to the new home loan rates announced by SBI.
Big Lenders have started passing on the benefit of falling key interest rates in the system to their retail customers. Therfore, we can see that other banks will also announce rate cuts soon to lure customers.
Ajay Verma, founder, and writer of The Housing World, a real estate and mortgage news website. He has over fifteen years of rich experience in the above-mentioned industries.