HDFC slashes home loan rate

HDFC slashes home loan rate
The Economic Times, August 14, 2009, Page 8

Our Bureau MUMBAI

HOUSING finance major HDFC has upped the ante for market share in the home loan market by reducing rates by 50 basis points in the Rs 30-50 lakh segment. The development comes within a week of the country's biggest bank SBI cutting rates by 50-75 basis points for high value loans, and offering loans up to Rs 5 lakh at a fixed rate of 8% for five years.

As per the revised rates, HDFC now offers loans between Rs 30-50 lakh at 9%. The rates will apply only to new customers as the lender has not revised its prime lending rate. HDFC had last cut rates in mid-July. Since then there has not been any reduction in policy rates by Reserve Bank of India.

SBI, over the past few months, has been increasing market share in the home loan segment. SBI's mortgage loan book has grown Rs 10,076 crore in the 12 months ended May 2009, which is over 77% of the Rs 13,028 crore growth recorded by the banking industry. HDFC now wants to take advantage of the festival season spike in business.

As against HDFC's 9% floating rate, SBI offers an adjustable rate where the home loans up to Rs 50 lakh are available at of 8% for the first year and 8.5% for the second and third year. Thereafter, rates will vary with the prime lending rate.

As a part of the government's efforts to help the ailing economy, several public sector lending institutions like Canara Bank, SBI and LIC Housing Finance, among others, have unveiled competitive schemes to attract home loan seekers. Given the tough competition in the segment, private lenders like HDFC have been forced to also cut rates.