Interest rates on existing home loans (floating) have started coming down. HDFC, the leading housing finance company, kicked off a reduction in old home loan rates by cutting its retail prime lending rates (RPLR) by 50 basis points with effect from December 22. The advantage of a cut in RPLR would accrue to all the existing floating rate customers over the period of next three months based on their respective reset dates, it said. This’s the first time that interest rates for existing floating loans customers are going down after a series of cuts in key rates and ratios by the RBI recently. Other banks are expected to follow suit and bring down the rates soon, banking sources said.
The company has also announced a reduction in the rates for new customers as well. It has now created two slabs for new customers. Rates on new floating loans up to Rs 20 lakh slab have been cut by 150 basis points from 11.75 per cent to 10.25 per cent. Rates on floating rates above Rs 20 lakh have been cut by 50 basis points from 11.75 per cent to 11.25 per cent. Renu Sud Karnad, joint MD, HDFC Ltd, said, “We have been able to bring down our costs due to improved operational efficiency and good quality portfolio. As in the past, HDFC has ensured that reduction in the cost of its resources translates into a benefit in terms of lower costs for both existing and new customers.”
Public sector banks last week 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, PSU banks would charge a maximum of 9.25 per cent. These rates would be reset only after five years. HDFC will also reduce its deposit rates by 50 bps across all maturities effective December 23. On an incremental basis retail deposits for the first seven months, April to October 2008, formed 62 per cent of HDFC's funding requirement. Similarly, the rates of interest on loans to NRIs have also been reduced.