Mumbai:

At a time when the economy is buzzing with the possibility of interest rates hardening, home loan major HDFC surprised everyone by slashing rates for the first year to 8.25% per annum, from 8.75% earlier.

As of now, this offer is for loan application made before April 30 and at least part-disbursement taken before June 30.

With its new offer, HDFC, in effect, also brought back what is popularly called the teaser rates’, and will take on SBI, which had raised rates for its housing finance products earlier this month.

Under the new scheme, HDFC is offering a fixed rate of 8.25% loans up to March 2011 and then 9% for the next one year, i.e. till March 2012. Thereafter, the HDFC customer will move to a floating rate structure according to the prevailing rate for the loan amount and tenure, a company release said.

The fixed rates, till March 2012,will be applicable for all loans irrespective of the tenure. The cut in rates was possible since HDFC’s cost of funds now permits it to offer a lower fixed rate for the first and the second year’s, said Renu Sud Karnad, MD, HDFC.

The teaser loans were introduced by SBI which forced other players to follow suit. While SBI still continues with its now-famous 8% rate for the first year, it has increased rates for the subsequent years and also cut the spread, effectively increasing rates over the tenure of the loan.

However, that has not stopped the banking major from cornering a big chunk of the housing loan pie lured by the teaser rates. HDFC will also continue with its existing floating rate product without any change where the rates applicable are 8.75% for loans up to Rs 30 lakh,9% for loans between Rs 30 lakh and Rs 50 lakh, and 9.25% for loans of Rs 50 lakh and above, the release said.

“This special offer is applicable to all new home loan customers who apply before April 30, and take at least part-disbursement before June 30. These customers will get a fixed rate of 8.25% up to March 31, 2011, 9% for the period between April 1, 2011 and March 31, 2012 and for the balance period the floating rate will apply,” Sud Karnad said.

While the fixed rate will remain the same irrespective of the loan amount, the floating rate will vary with the loan amount. Under this offer, the floating rates has two slabs, i.e. loans up to Rs 30 lakh where the rate will be 9% and above Rs 30 lakh where the rate will be 9.25%.

“Even though there is a marginal increase as compared to the earlier offer, our effective rate over a 15-20 year term is very attractive and is much better than other large players,” Sud Karnad added.

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