ICICI Bank to charge more for home loans

ICICI Bank to charge more for home loans
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First Published: Wed, Feb 07 2007. 05 52 AM IST
Updated: Wed, Feb 07 2007. 05 52 AM IST
A day after finance minister P. Chidambaram asked public sector banks not to hike home loan rates, India’s largest private sector bank ICICI Bank raised its home and consumer loan rate by 1 percentage point.
The bank has raised the interest rate on floating rate home loans from 9.5% to 10.5%. Its fixed rate home loan will cost 12.5% from 9 February.
Following this hike, an existing floating rate customer will have to pay Rs66 extra per lakh per month. A home loan buyer, who has taken Rs25 lakh loan for 20 years, will now pay Rs19,800 extra every year. A new fixed rate customer will have to pay Rs21,000 more every year for a Rs20 lakh loan repayable over 25 years.
Usually, a home loan customer’s monthly outgo is not affected by a hike in the interest rate as banks increase the maturity period. However, banks have started increasing monthly instalments on home loans following a series of rate hikes.
For ICICI Bank, this is the fifth increase in home loan rates over the past year. On each of the earlier four occasions, the bank hiked the rate by half a percentage point.
The Reserve Bank of India has raised its policy rates by as many times last year.
Housing Development Finance Corporation, another mortgages firm, does not plan to hike its home loan rate immediately.
“We have no plan to raise our rates right now,” Renu S. Karnad, HDFC’s executive director told Mint. Public sector banks, led by the State Bank of India, say they do not plan toraise their rates.
“We have had to hike the rates following the policy rate hike but we hope that demand for home loans is not impacted,” said V. Vaidyanathan, the head of retail loans at ICICI Bank.
According to a Pune based property consultant Suresh Castellino, the salaried middle class will find it virtually impossible to buy a flat within the city limits.
“The demand for home buying is slowing down,” Castellino said.
Deepang Karia, a manager with a private sector bank, is putting off his plan to buy a flat. “Both property prices as well as loan rates are going up. I prefer to wait for a year now,” he said.
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First Published: Wed, Feb 07 2007. 05 52 AM IST
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