Mumbai: On the heels of public sector banks slashing home loan rates, LIC Housing Finance has announced a 1.75-2.25 percentage point cut in lending rates for home loans up to Rs20 lakh from 17 December.
“We have reduced our lending rates with effect from 17 December. For a five-year term, our lending rate for loans up to Rs20 lakh is 9.25% and for those beyond five years, the rate will be 9.75%,” LIC Housing Finance Director and Chief Executive R.R. Nair told PTI.
For loans above Rs20 lakh, the rate has been reduced from 11.5% to 11.25%, Nair said.
Public sector banks recently cut their lending rates on home loans up to Rs5 lakh to 8.5% and loans of Rs5-20 lakh to 9.25% for the first five years, after which the lending rates will be reset.
The scheme, which is applicable for loans taken till June 30, also offers free life insurance cover and exemption from pre-payment penalties to borrowers in these categories.
LIC Housing Finance is offering floating rates for home loans. Within six months it will be linked to prime lending rates (PLR) minus 3 percentage points, or 2.5%, depending upon the customer profile, Nair said.
The rates will be reviewed on 1 April or 1 July next, he said.
“Though the government has directed public sector banks to give a five-year fixed rate, we cannot give fixed rates for five years because of possible uncertainties in market trends,” Nair said.
The Reserve Bank recently announced a Rs 4,000-crore refinancing facility for National Housing Bank and this has helped LICHF to lower its home loan rates, Nair said.
“We could think of reducing our rates because of the National Housing Bank (NHB) window of Rs4,000-crore for housing finance companies,” he said.
LICHF expects to receive a “good share” of the corpus very soon, facilitating the company to lend more to small home loan borrowers, Nair said.
“We are expecting that a good share of that corpus would come to us at a lesser cost of around 8%,” he said.
After the central bank eased the tight liquidity situation by infusing over Rs3-lakh-crore liquidity into the banking system, many banks had reduced their housing loan rates in the recent past.
This included the country’s largest home loan lender Housing Finance Development Corporation and leading private-sector lender Bank of Rajasthan in the range of 0.5-1.5%.