Public sector lender, Union Bank of India matched the special home loan rate of State Bank of India (SBI) by offering home loans at 8 per cent for all new loans up to Rs 50 lakh for the first year. Interest rates for existing home loan borrowers will remain unchanged. Maximum tenure of the loan will be for 20 years.
“As property prices have stabilised in the tier II and tier III cities, the demand is likely to pick up strongly in these pockets. So it is a good time to expand our portfolio now. The bank expects to disburse Rs 1,500 crore of home loans under the new scheme. The bank home loan book is 8 per cent of its total advances at Rs 7,000 crore,” said TY Prabhu, executive director, Union Bank of India.
The special home loan scheme open up to September 30, 2009, will offer both floating and fixed rates of interest. For the first year, it will remain fixed and then revert to floating rates of interest which will be linked to the a retail benchmark rate referred to as floating reference Rate (FRR).
In February this year, SBI announced a happy home loan scheme with home loans at 8 per cent irrespective of the quantum of the loan, got an overwhelming response. About Rs 2,348 crore of home loans were dispersed under this scheme in the first two months of its launch in February and March.
SBI rates were closely matched by Canara Bank, which offered home loans at 8.25 per cent for the first year and 9.25 for the next four years and then fixed at 10 per cent for the remaining tenure of the loan.
Subsequently, PNB on April 30 announced a special home loan scheme of 9 per cent for all loans up to Rs 50 lakh for the first five years after which a reset clause will come into force.
Public sector banks have been aggressively reducing interest rates on its retail loans specially the home loans in a bid to grow their retail portfolio.
Since the credit offtake is dipping to less than 17 per cent as corporate demand for loans is yet to take off, banks are trying to expand capital by extending finance to retail customers.
Source:www.mydigitalfc.com