HDFC home loans get cheaper as lender cuts benchmark rate

Mumbai: Housing Development Finance Corp., the country’s largest mortgage lender, on Monday said that it has reduced its retail prime lending rate by a quarter percentage point.

Following the reduction, the effective home loan rate for new customers would be 9.65% per annum, said HDFC in a statement. The reduction in rates is effective 6 October.

HDFC has recently made similar reduction in its deposit rates across all maturities, said the lender, indicating that there would be minimal impact on lending margins.

“The cut in rates is a reflection of the lower cost of funds in the market,” said Keki Mistry, vice chairman and chief executive officer at HDFC Ltd on the phone.

HDFC joins other lenders in reducing rates following the RBI’s decision to cut its benchmark repo rate by 50 basis points to 6.75% on 29 September. Since then, most banks have cut their base rates.

Last week, India’s largest private sector lender ICICI Bank Ltd cut its base rate by 35 bps to 9.35%, while Axis Bank Ltd cut its base rate by 35 bps to 9.5%. The country’s largest lender, State Bank of India Ltd, had cut rates by 40 bps to 9.3% a day after the RBI’s decision.

The onset of the festive season is an important time for the home loan market along with other retail loans segments, which pushes lenders to remain competitive in the rates they offer. According to RBI data, housing loans grew at 17.8% in the 12 months till 22 August 2015, making it one of the fastest growing segments.

“In the June quarter, individual housing loans grew at about 23%,” said Mistry while declining to give an indication of what demand has been like since then due to a silent period ahead of earnings.