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Big PSBs may hike rates on second home loans

Second home loans may cost more as some large public sector banks are contemplating a higher interest rate but home loans below Rs 20 lakh are likely to get cheaper.

india Updated: May 13, 2007 15:36 IST

Second home loans may cost more as some large public sector banks are contemplating a higher interest rate but home loans below Rs 20 lakh are likely to get cheaper, providing relief to the lower and middle-classes.

Taking a cue from Union Bank of India which has reduced its interest rate on home loans below Rs 20-lakh, a few large public sector banks are understood to be considering following suit. Smaller banks, however, appear unlikely to do so.

Similarly, a higher rate of interest for second home loans also appears on the cards, but here again, it is the bigger public sector banks which are believed to be considering such a move.

"There's been some thinking on these lines," a top State Bank of India (SBI) official said. "However, no decision has been taken as yet. We will decide within the next 10 days."

Presently, SBI charges the same rate for both first and second time home loans. ICICI, a big-time home loans lender, has already indicated that it may consider a higher rate for second-time loans to discourage speculation in the real estate sector.

A Bank of Baroda official said that reducing rates on loans below Rs 20-lakh would depend upon factors like cost of funds for the bank. "We are studying the matter," he said.

The official said that charging a higher interest rate for second home loans was also "under discussion" but a decision either way will be taken only by end-May or early-June.