With yet another cut in the home loan interest rates, it’s the consumers who are now a in quandary about selecting a bank as almost all banks are offering the ‘best interest rates.’ It’s the dedicated housing finance companies like HDFC which are facing the heat as almost public sector banks are offering better rates. In fact, competition has finally made HDFC to wake up and take notice of its customers. It finally caved in on last Tuesday, and announced interest rate cut after State Bank of India and ICICI Bank took the lead in cutting rates for the fifth time in the current fiscal. The rate cut came days after SBI, ICICI Bank, Canara Bank, Oriental Bank and LIC Housing Finance reduced their rates to stay competitive in the fast growing housing sector.However, HDFC continues to bleed its customers with higher rates than competition (see chart) and consumers will have no option but to walk into the nearest PSU bank branch due to lower interest rates offered by them. For example, while ICICI Bank is offering the lowest rate of 8.75 per cent for a five-year loan, HDFC still charges 9.25 per cent for a fixed rate loan and 9 per cent for floating rate loan. SBI offers the same rate as HDFC.For the 6-10 year tenure loan, SBI is relatively cheaper at 9.25 per cent while HDFC will charge 0.25 per cent more at 9.5 per cent. In floating rate loan too, SBI is charging 0.25 per cent lower than both ICICI Bank and HDFC at 9 per cent. For reasons best known to them, HDFC has also kept its long-term 11-20 year loan more expensive than ICICI Bank and SBI at 10 per cent and 9.75 per cent for fixed and floating rate loan respectively.HDFC also realised now that it’s time to charge their interest on a quarterly rest basis instead of 6-monthly charged earlier while PSU banks have reduced it to a daily basis. This effectively means that a consumer will be charged same interest for three continuous months instead of levying an interest on a daily basis. HDFC says that this reduction will benefit all customers who have availed of loans under the floating rate home loan scheme which is linked to the RPLR while fixed customers will continue to pay higher interest charges despite a massive fall in the interest rates.In fact, a relatively smaller player in the housing finance industry, Punjab National Bank also joined the interest rate war on housing loans by slashing floating rates to 8.5 per cent from February 10. The PNB’s rate of interest under the floating option would be 8.5 per cent for a five years loan, while it would be 9 per cent for 5-10 year loans and 10 per cent for 20-25 year loans.PNB has decided to keep fixed rate on housing loans at 9.25 per cent for loans up to five years. In case of 5-10 years, it would be 10.25 per cent, 10.50 per cent for 10-20 year loans and 11 per cent for 20-25 years loans.With the reduction of interest rates the bank has also offered longest repayment period (25 years), 18 months repayment holiday, application of interest rate on daily reducing balance basis, graduated EMI option, no age-wise entry level barriers and option to switch between floating and fixed rate of interests.Central Bank of India has also joined the rate cut war by reducing its floating and fixed interest on housing loans by 0.25 to 0.5 per cent with effect from February 10. The revised floating rate for a loan of up to five years would be 8.5 per cent (9 per cent earlier). The interest in case of 5-10 years and 10-20 years would now be 9 per cent (9.5 per cent) and 9.5 per cent (10 per cent) respectively. Simultaneously, interest rates for fixed category stands reduced to 8.75 per cent (9.25 per cent) for up to five years, 9.25 per cent (9.75 per cent) for 5-10 years and 10 per cent (10.25 per cent) for 10-20 years, it said. The existing period of repayment for 15 years has now been enhanced to 20 years in both categories, the bank said adding, processing fees have also been waived till this March 31.
