There is good news for people who have taken a loan with a floating interest rate to buy their dream homes. HDFC, the leader in the home fin...
There is good news for people who have taken a loan with a floating interest rate to buy their dream homes. HDFC, the leader in the home finance business in India, has decided to cut interest rates on floating rate home loans for all its existing customers by 25 basis points (100 basis points=1%). With the leader cutting rates, the market expects it will be only a matter of time before other players follow. HDFC had last cut rates in mid-2003.
The advantage of a cut in interest rate will accrue to all the existing floating rate customers over the next three months based on their respective reset dates, HDFC said. The home lender follows a system whereby for each of its customers, if required, the interest rate is re-set at the end of the third month with the date of initial disbursal as the reference date. For example, for someone who had taken a loan on Nov 1, the cut in rates will be effective Feb 1. On the other hand, for a person who had taken a loan on Dec 15, the effective date will be April 1 the following year.The last time HDFC had cut home loan rates was in July 2003. Since then rates had been on a northward journey as the economy showed robust growth and the rate of inflation rose.The rate cut by HDFC has occurred despite the RBI on Tuesday deciding to keep all policy rates unchanged. Industry estimates peg HDFC’s market share in the home loan market at about 35-37%. The other major players are ICICI Bank and State Bank of India. ICICI Bank is still to take a decision on revising its housing loan rates. A top ICICI Bank official said the bank’s decisions on home loan rates were based on its cost of funds. As of Thursday evening, SBI had not taken any decision on home loan rates.
The advantage of a cut in interest rate will accrue to all the existing floating rate customers over the next three months based on their respective reset dates, HDFC said. The home lender follows a system whereby for each of its customers, if required, the interest rate is re-set at the end of the third month with the date of initial disbursal as the reference date. For example, for someone who had taken a loan on Nov 1, the cut in rates will be effective Feb 1. On the other hand, for a person who had taken a loan on Dec 15, the effective date will be April 1 the following year.The last time HDFC had cut home loan rates was in July 2003. Since then rates had been on a northward journey as the economy showed robust growth and the rate of inflation rose.The rate cut by HDFC has occurred despite the RBI on Tuesday deciding to keep all policy rates unchanged. Industry estimates peg HDFC’s market share in the home loan market at about 35-37%. The other major players are ICICI Bank and State Bank of India. ICICI Bank is still to take a decision on revising its housing loan rates. A top ICICI Bank official said the bank’s decisions on home loan rates were based on its cost of funds. As of Thursday evening, SBI had not taken any decision on home loan rates.
