The housing finance arm of Life Insurance Corporation, LIC Housing Finance (LICHF) has cut down the home loan rates by 100 basis points for the new borrowers.
The lending rates across various loan categories have been declined irrespective of their tenure. Home loans up to Rs 30 lakh are slashed to 8.75% from the earlier 9.75%. Similarly home loans above Rs 30 lakh are also reduced by 100 basis points to 9.75%. The revised rates by the firm are going to be applicable from February 1st.
LIC Housing Director and CEO, R R Nair said: "Earlier, similar loans with a tenure up to five years charged 9.25 percent and loans with tenure between five and 20 years attracted 9.75 percent. Now we have decided to aggregate the two schemes and charge same interest rate."
"We have passed on the benefit of incremental reduction in costs to the new borrowers. We always take a quarterly review of the lending rates for the existing borrowers, as we take into account the average cost of funds which is next due in April," Nair added.
He informed that nearly 80% of the firm's loan fall under the Rs 30-lakh category, with an average loan size of Rs 16 lakh.
However the present rate cut is not applicable for the existing borrowers but the company is expected to review its decision at the beginning of the new fiscal on April 1st.
Earlier on January 1st, LICHF reduced its home loan rates by 75 basis points for the existing borrowers. Presently the lending rates for these customers range between 10.75% and 11.25%.
In the last quarter, the firm reported an increase of 26.7% in the net profit at Rs 134.33 crore and extended loans to the tune of Rs 1,944 crore. However the total borrowing is expected to rise from Rs 7,490 crore last year to up to Rs 11,400 crore by the end of the fiscal. "The repayment outgo has increased with rising costs, so our borrowings for FY09 have increased. We have already borrowed Rs 8,800 crore in FY09 and we would require another Rs 2,500 crore to support our annual disbursement target of Rs 10,000 crore," said Nair.
Besides many public sector banks in the industry have also cut the lending rates after their meeting with the Finance Minister, Pranab Mukherjee. Banks including UCO Bank and Corporation Bank have pointed out nearly 50 to 100 basis points cut in their lending rates.
In fact the largest lender, State Bank of India (SBI) has announced home loans at 8% for one year. Even PNB has slashed its PLR and is likely to cheapen all the loans linked to PLR.