AT A time when home loan borrowers are getting increasingly apprehensive about the interest rate burden piling up on their equated monthly instalments (EMIs), home loan companies are trying to create excitement in the segment by offering attractive interest rates on new loans.
ICICI Bank recently created a stir in the market with the re-introduction of the ‘teaser rate’ home loans, where borrowers were promised fixed rates between 10.25-11.25 per cent for the first one or two years of the home loan.
India Infoline group company, IIFL, chugged along, offering fixed rates of 10.99 per cent on home loans for two years, even if the Reserve Bank of India (RBI) increases rates during the period, while Indiabulls Home Loans promises home loans at 10.75%.
“The idea behind this is simply to acquire more customers. India is a hyper competitive market and in a competitive market, everyone has to look for ways and means to expand and grow business,“ says R Venkataraman, MD, IIFL.
It is intense competition in the business that is driving players to announce such competitive rates, industry members say and not a slowdown caused by consumers apprehensive about increasing interest rates.
The number of people buying a house as an investment has slowed down while first time home buyers are still making their purchase and are not too bothered by rates hikes, say industry members unanimously.
“When there are so many banks and non-banking finance companies offering home loans, the interest rates can be the only differentiating factor,” reasons V Rama Gopal, ED, Indian Bank.
Interestingly, the 10% odd interest rates promised by the banks and home loan companies comes at a time when interest rates are believed to have reached the peak and are expected may soften after October. The companies, however, differ on this.
“Looking at the inflation numbers no one can say how interest rates will go from here. Nobody can predict that,“ Venkataraman says.
For banks it is not just competition, but also meeting credit targets, which could be the reason for offering such attractive rates.
SBI, which was the only bank to have the teaser rates for a long time, had to pull it back because of pressure from the RBI. However, the bank saw a 20 per cent growth in its home loan portfolio for the quarter ended June, 2011, largely due to the industry lowest teaser rates.
“Since corporate lending has slowed down, banks want to step up retail lending to meet their overall credit targets through housing finance, since the segment is growing,“ says VK Sharma, CEO, LIC Housing Finance.
Source: FC
ICICI Bank recently created a stir in the market with the re-introduction of the ‘teaser rate’ home loans, where borrowers were promised fixed rates between 10.25-11.25 per cent for the first one or two years of the home loan.
India Infoline group company, IIFL, chugged along, offering fixed rates of 10.99 per cent on home loans for two years, even if the Reserve Bank of India (RBI) increases rates during the period, while Indiabulls Home Loans promises home loans at 10.75%.
“The idea behind this is simply to acquire more customers. India is a hyper competitive market and in a competitive market, everyone has to look for ways and means to expand and grow business,“ says R Venkataraman, MD, IIFL.
It is intense competition in the business that is driving players to announce such competitive rates, industry members say and not a slowdown caused by consumers apprehensive about increasing interest rates.
The number of people buying a house as an investment has slowed down while first time home buyers are still making their purchase and are not too bothered by rates hikes, say industry members unanimously.
“When there are so many banks and non-banking finance companies offering home loans, the interest rates can be the only differentiating factor,” reasons V Rama Gopal, ED, Indian Bank.
Interestingly, the 10% odd interest rates promised by the banks and home loan companies comes at a time when interest rates are believed to have reached the peak and are expected may soften after October. The companies, however, differ on this.
“Looking at the inflation numbers no one can say how interest rates will go from here. Nobody can predict that,“ Venkataraman says.
For banks it is not just competition, but also meeting credit targets, which could be the reason for offering such attractive rates.
SBI, which was the only bank to have the teaser rates for a long time, had to pull it back because of pressure from the RBI. However, the bank saw a 20 per cent growth in its home loan portfolio for the quarter ended June, 2011, largely due to the industry lowest teaser rates.
“Since corporate lending has slowed down, banks want to step up retail lending to meet their overall credit targets through housing finance, since the segment is growing,“ says VK Sharma, CEO, LIC Housing Finance.
Source: FC
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