Home loan war: ICICI cuts rate to 8.25 per cent

After HDFC and State Bank of India,more banks have entered the home loan rate war. ICICI Bank and Kotak Mahindra Bank...

After HDFC and State Bank of India,more banks have entered the home loan rate war. ICICI Bank and Kotak Mahindra Bank have launched new home loan schemes combination of fixed-cum-floating schemes at lower interest rates.

ICICI Bank has come out with a home loan scheme at a fixed interest rate of 8.25 per cent for first two years which is nearly 100 basis points lower than its normal floating rate of 9.75 per cent on Rs 20-50 lakh loan and then it would be adjusted to the then prevailing floating interest rate. The rate would be applicable to new home loans sanctioned between December 01,2009 and January 31,2010. The first disbursement must be availed before March 31,2010, a bank official said,adding that the interest rate to be charged for new home loans up to Rs 20 lakh is 8.25 per cent fixed for first two years.

For third year onwards for loan up to Rs 20 lakh,the floating reference rate (FRR) would be 4 per cent adjustable rate for home loan (ARHL). For loans ranging between Rs 20-50 lakh,the FRR would be 3.5 per cent ARHL. But for loans above Rs 50 lakh,the FRR would be 3 per cent ARHL. However,if the customer who wishes to go for the normal floating interest rate,the interest rate would remain unchanged. While the floating interest rate for home loans up to Rs 20 lakh will be 8.75 per cent. The interest rate for loans ranging between Rs 20-50 lakh,would be 9.25 per cent. Above Rs 50 lakh,the floating interest rate is 9.75 per cent, it said.

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Kotak Mahindra Bank said the special offer of 8.49 per cent 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 based on the retail prime lending rate.

For salaried customers,the bank said it would offer floating rates starting from 7.99 per cent per annum depending upon the loan amount. The bank is now in a position to offer these exciting offers that reduce the burden of home buyers. We believe that in order to succeed,we need to offer not only competitive products,but also the best possible service and value-added features cum benefits. It is with this thought in mind that we innovate constantly,and have tailor-made products for salaried and self employed customers, said Kotak executive vice-president,mortgages,Kamlesh Rao.

Last week,premier housing finance company HDFC had offered 8.25 per cent rate up to March 31,2012 and the balance period in the nature of floating rates. This offer was to counter market leader SBIs offer of 8 per cent rate in the first year. SBI has been offering home-loans at as low as 8 per cent up to Rs 30 lakh fixed for the first year,8.5 per cent for second year and from the third year onward it said it would move to a floating rate. The SBI scheme had generated substantial interest from aspiring home-buyers across the country.

The cost of funds for banks has come down with the cut in deposit rates across the spectrum.

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