HDFC cuts home loan rates for all customers

Mumbai: HDFC Ltd, the country's largest housing finance company, on Friday cut its lending rate by 50 basis points for loans of more than Rs 20 lakh for both existing and new customers and introduced a new slab for sub-Rs 20 lakh.

Loans of up to Rs 20 lakh will attract an interest rate of 10.25 per cent and the rates for loans above this level has been pegged at 11.25 per cent down from 11.75 per cent. The new rates would be effective from Monday.

"The advantage of a cut in retail prime lending rates (RPLR) will accrue to all the existing floating rate customers over a period of next three months based on their respective reset dates," HDFC said in a statement.

The housing major's decision to reduce rates comes within 24 hours of Home Minister P Chidambaram announcing in Parliament that the government will persuade banks to reduce loans for existing home loan borrowers as well.

HDFC also decided to reduce the deposit rates by 50 basis points, the statement added.

HDFC Bank joint MD Renu Karnad said, "When we cut a PLR it means that loans which are existing today will also get the benefit. So we have dropped our retail PLR by half per cent which means all current borrowers will get the benefit. The new borrowers who are taking loans begining Monday onwards for loans upto Rs 20 lakh will get a further half per cent reduction. So if you take a loan on Monday which is up to Rs 20 lakh - fresh loans and not refinancing loans - you will get it at 10.25 per cent and loans between Rs 20-75 lakh will be at 11.25 per cent."

HDFC's closest competitor in home loans ICICI Bank had earlier in this month reduced interest rates by 150 basis points to 11.50 per cent for fresh loans of up to Rs 20 lakh.

Public sector banks have already capped the interest rates at 8.5 per cent for loans up to Rs 5 lakh to encourage low-income housing.

For middle-income loans of Rs 5-20 lakh, the PSU banks would charge a maximum of 9.25 per cent. These rates would be reset only after five years.

The scheme by PSU banks is valid up to June 30, 2009. The state-run banks have also done away with processing fee and pre-payment charges for loans up to Rs 20 lakh.

In addition, the PSU lenders have decided to offer free life insurance cover to the home loan seekers as an add-on with the credit.