HDFC discontinues teaser rates

HDFC discontinues teaser rates

Mumbai: India’s largest pure-play mortgage player HDFC on Wednesday decided not to extend its teaser or dual rate home loan scheme, which was extended four times since its launch in December 2009, from today.

“The scheme was valid up to 30 November and we decided not to extend it," a company spokesman said when contacted and refused to give more details.

Earlier in the day, ICICI Bank too announced discontinuance of its teaser rate scheme which entail cheaper loans to new borrowers, with immediate effect. It was offering 8.5% first year, 9.25% in the second year and 1.5% over and above the base rate from then onwards.

HDFC had launched the dual rate loan product in December 2009 for new loans which offered a fixed rate of 8.25 to 8.85% interest rate for the first year, 9 to 9.5% in the second year and the applicable floating rate for the remaining period of the loan. When launched the first year attracted only 8.25% and second year 9%.

Under this HDFC offered three slabs -- loans up to Rs30 lakh, Rs30-Rs 50 lakh and over Rs50 lakh and above.

Though initially launched as a limited period offer, the scheme was extended in April, June, and September of 2010 following its market success.

It may be recalled that the Reserve Bank was not comfortable with this scheme considering the probable default, from the beginning and since banks refused to heed to its advice even after bringing in the base rate system--a bew benchmark lending rate below which a bank cannot lend--in the second quarter credit policy, RBI upped five times provisions for such loans from 0.4% to 2% of the exposure.

As of now among the major players, only State Bank is still offering this scheme. The SBI scheme is also up for review by the month end.