In a move that marks the end of teaser rates on home loans and the beginning of hardening of home loan rates, housing finance companies (HFCs), HDFC and ICICI Bank on Friday rolled back their two-year fixed home loan offering at 8.25 per cent, effective March 1.
The two command a 55 per cent marketshare of the home loans market with leader HDFC controlling a 35 per cent share and ICICI Bank 20 per cent (SBI has a 22 per cent share), according to industry sources.
But the hardening is not on home loans alone. On the auto loans front, ICICI Bank and Kotak Mahindra Bank raised rates by 50 basis points (100 basis points make 1 percentage point) and 50-75 basis points, respectively.
HDFC Bank has hinted at following suit.
While Kotak’s auto loans hike will be effective March 6, it had raised its home loan rate by 50 basis points on February 18.
With rollbacks in place, the entry rate for home loans from ICICI Bank and HDFC stands at 8.75 per cent for loans up to Rs 30 lakh and Kotak offers 8.5 per cent.
“Clearly, there is an upward bias but it will depend on how the market moves on deposit front,” said K.V.S. Manian, group head (liabilities and branch banking), Kotak.
LIC Housing Finance is also looking at its cost of funds. “There is an upward bias but as of now we are continuing with the current rates,” the company’s CEO R.R. Nair said. “If we see an upward movement in rates, we will revise our rates.”
Not all agree. “Rates may go up but not in the short-term as there is ample liquidity of about Rs 350,000 crore in the system,” said Keki Mistry, vice chairman and managing director, HDFC.
Barely a month of Reserve Bank of India raising concerns on teaser rates, the two leading private sector HFCs have withdrawn their offerings.
“ICICI Bank has discontinued the 2-year fixed rate home loan scheme with effect from March 1, 2010,” an ICICI Bank statement said.
While ICICI Bank raised the auto loan rate by 25-50 basis points from Friday, HDFC Bank may follow. “There is a possibility of a revision in auto loan rates by 50 basis points,” an HDFC Bank official on conditions of anonymity said.
Public sector banks, however, are likely to stick to their special schemes till the end of this month. “We are still offering the special rates and will continue till March 31,” a Punjab National Bank official on conditions of anonymity said.