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Home loan rates all set to come down

business Updated: Sep 22, 2007 03:41 IST
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After soaring for about two years, home loan rates are coming down. HDFC on Friday decided to make cuts next week.



"We are in a position to reduce rates since the cost of funds has come down by 0.5 per cent in the last two months," HDFC chairman Deepak Parekh said, without specifying the quantum of the cut. HDFC reduced the rate for new customers by 0.25 per cent in June, offering loans at 11 per cent while holding rates at 11.25 per cent for existing customers under the floating rate structure.



A trigger for the dive is competition. Australia's Wizard Home Loans entered the Indian market in a joint venture with GE Money offering loans at 9.99 per cent on Thursday. This is 0.5-1.75 per cent less than rates offered by SBI, HDFC and ICICI Bank.



Almost all lenders are in a mood to drop rates in the range of 0.25 per cent to 0.5 per cent. Three days ago, IDBI reduced interest rates by 1 per cent on loans up to three years at 12.5 per cent. Bank of Baroda had cut floating rate for loans up to Rs 20 lakh for new borrowers by 0.5 per cent in August.



A stronger downward trend will emerge once the RBI signals a rate cut. Though the US Federal Reserve has reduced rates by 0.5 per cent, economists feel that inflationary pressures may force the RBI to hold the rate.