ICICI Bank took on State Bank of India to intensify a home loan rate war on Friday by announcing a quarter-to-half percentage point cut in lending rates split into three slabs. Loans of up to Rs. 20 lakh will now come at 9.75 per cent, but only for new customers.
The new rates for the home loans are— 9.75 per cent for loans up to Rs 20 lakh and 10 per cent for loans in the Rs. 10 to 20 lakh range. Larger loans of up to Rs. 30 lakh will come at 11.5 per cent.
“This is not a special scheme but an ongoing continuous scheme. The three slabs have been made to make loans affordable according to the category of the customer,” said a senior official from ICICI Bank. “Rates for existing customers are a factor of the cost of funds and hence a cut in those rates are a factor of the cost going down.”
The new rates came amid a market-shaking initiative by SBI, which priced its loans at 8 per cent, but only for the first year.
LIC Housing Finance is offering a rate of 8.75 per cent for loans up to Rs 30 lakh and thus is the cheapest. HDFC is charging 9.75 per cent for loans up to Rs 30 lakh and 10.75 per cent for larger amounts.
At 9.75, the offering by ICICI and HDFC is effectively cheaper than the SBI’s offering (8 per cent for first year and 10.25 from the second year linked to the BPLR – benchmark prime lending rate -- that takes the effective rate to 9.94 per cent). The effective rate changes from the second year, because SBI’s charge goes up in a manner that balances out the gains given to customers in the first year.