Joining the battle being fought in the market for mortgages, India's second-largest lender, ICICI Bank, has cut rates for home loans from August 20.
Accordingly, the rate for home loans up to Rs 20 lakh (Rs 2 million) will now be 8.75 per cent, while loans between Rs 20-50 lakh (Rs 2-5 million) will be charged 9.25 per cent. For loans above Rs 50 lakh (Rs 5 million), the rate has been fixed at 9.75 per cent. Earlier, loans below Rs 30 lakh (Rs 3 million) were charged 9.25 per cent while the rate for loans above Rs 30 lakh (Rs 3 million) was 9.75 per cent.
The battle in the home-loan market was sparked by the country's largest lender, State Bank of India (SBI), which announced a competitive package early this month. Now, loans from SBI are available for 8 per cent for the first year and 8-9 per cent for the next two years depending on the size of the scheme.
Two weeks ago, India's largest mortgage lender, Housing Development and Finance Corporation (HDFC), reworked its interest rate slabs, resulting in a 50 basis points (bps) cut to 9 per cent for loans of Rs 30-50 lakh (Rs 3-5 million). In mid-July, HDFC had cut interest rates on loans of up to Rs 15 lakh (Rs 1.5 million) by 50 basis points to 8.75 per cent.
The last mortgage player to cut home-loan rates was LIC Housing Finance. The country's second-largest mortgage player cut floating rates by 50 bps from 9.25 per cent to 8.75 per cent for loans of Rs 30-75 lakh (Rs 3-7.5 million).
ICICI Bank, which has seen high losses on its unsecured loans portfolio, has indicated that it wants to continue growing its mortgage and auto loans portfolios.
As of June 30, 2009, the lender's outstanding housing loans portfolio was Rs 53,472 crore (Rs 534.72 billion). Credibility of borrowing scheme may help lower costs.
