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Home loans to cost more from Monday onwards

Home loan rates of public sector banks moved up as banks like SBI, PNB, OBC and BoB hiked interest rates.

india Updated: May 01, 2006 18:36 IST

Home loan rates of public sector banks moved up from today as banks like SBI, PNB, OBC and BoB hiked interest rates after the RBI upped provisioning and risks weightage in the annual credit policy.

City-based Punjab National Bank on Monday announced a 0.50 per cent hike in housing loans, both fixed and floating, on lines of similar move by bigger player SBI and other PSU banks.

The second largest public sector bank PNB on Monday revised housing loans of various maturities.

PNB customers opting for floating rates will have to shell out 8.25 per cent interest for loan up to 5 years against the existing 7.75 per cent.

Loans above 5 years and up to 10 years would cost 8.50 per cent against the existing 8 per cent, while those above 10 but up to 20 years will be charged 8.75 per cent against the current 8.25 per cent.

Loans above 20 years and up to 25 years would draw 9.50 per cent against the existing 9 per cent.

Those choosing fixed interest rates will have to pay interest rates in the range of 9.75 per cent to 11.50 per cent.

The move follows RBI's decision to hike provisioning from 0.40 per cent to one per cent in housing loans above Rs 20 lakh and increase in riks weightage to the real estate sector.

PNB also announced increase in fixed deposit rates by 0.25-0.50 per cent on all maturities above 180 days. The bank also revised its prime lending rate by 0.50 per cent to 11.25 per cent.

The bank had also increased prime lending rate by 0.50 per cent to 10.75 per cent.

Two other PSU banks -- OBC and BoB -- have also raised interest rates on home loans from Monday.

Oriental Bank of Commerce, which announced increase in home loan interest rates in the range of 0.25 per cent to one per cent, also decided to do away with fixed rate home loans for beyond 10 years.

OBC Chief Managing Director KN Prithviraj attributed the move to RBI norms of not allowing banks to go for deposits beyond 10 years.

BoB hiked housing loans by 0.50 per cent with effect from Monday.

Already, home loan leader HDFC had revised upwards its rates by 0.50 per cent in February after the quarterly review of monetary policy increased repo and reverse repo rates to contain inflation.

Another big player in the home loan segment in private sector ICICI Bank has said it will "wait and watch" before taking a call on hiking home loan rates.

The home loan rates had reached a rock bottom of 7 per cent by 2003 after various banks resorted to rate war to woo customers creating a boom in the housing sector.

First Published: May 01, 2006 18:36 IST