Home loan battle heats up as ICICI, Kotak cut rates

Home loan battle heats up as ICICI, Kotak cut rates
The Financial Express, December 9, 2009, Page 13

fe Bureau, Mumbai

The home loan product with low fixed rate for the first two years seems to be gaining popularity. Private sector lenders ICICI Bank and Kotak Mahindra Bank have followed State Bank of India and HDFC and have launched similar loan schemes combining fixed and floating interest rates. ICICI Bank and Kotak Mahindra on Tuesday announced low rates of 8.25% and 8.49% respectively for home loans.

A spokesperson of ICICI Bank told FE, "The bank is now offering home loans at a fixed interest rate of 8.25% for first two years which then would be adjusted to the then prevailing floating interest rate. The rate would be applicable to new home loans sanctioned between December 1, 2009 and January 31, 2010. Also, the first disbursement must be availed before March 31, 2010."

"The interest rate to be charged for new home loans upto Rs 20 lakh is 8.25% fixed for first two years. For third year onwards for loan upto Rs 20 lakh, the floating reference rate (FRR) would be 4% adjustable rate for home loan (ARHL). For loans ranging between Rs 20-50 lakh, the FRR would be 3.5% ARHL. But for loans above Rs 50 lakh, the FRR would be 3% ARHL. The floating interest rate for home loans upto Rs 20 lakh will be 8.75%," he added. Similarly the interest rate for floating loans ranging between Rs 20-50 lakh, would be 9.25% and for Rs 50 lakh above the floating interest rate is 9.75%.

Meanwhile, Kotak Mahindra Bank also said the special offer of 8.49% can be availed for all new loans irrespective of the loan amount for 30 months. But the offer is limited till January 31, 2010. It will charge floating rates after the 30-month period, which will be decided based on the retail prime lending rate. While the fixed duration loan rate will remain the same irrespective of the loan amount, the floating rate will vary with the loan amount, the bank said.

For salaried customers, the bank said it would offer floating rates starting from 7.99% per annum depending upon loan amount.

Last week, premier housing finance company HDFC had offered 8.25% rate up to March 31, 2012. This offer was to counter SBI's offer of 8% rate for the first year.