After HDFC reducing floating home loan rates by 50 basis point, it is now the turn of Axis Bank, which has reduced its floating home loan rates by 50 basis points to 10.50 per cent for existing and new customers.
Kotak Mahindra Bank has also reduced its floating home loan rates by 50 basis points. ICICI Bank, the largest private sector bank in the country, last week cut its retail loan rates, except for home loans, by 50 basis points.
However, it is important to note that the reduction in rate is on floating rate loans, which can be increased at the discretion of the bank depending on the market situation.
"We are offering a discount to both existing and new customers. The bank's home loan portfolio constitutes around 54 per cent of the bank's total assets. A majority of the home loan portfolio comprises floating rate loans. Competition in the home loan market among other factors prompted us to take this decision,'' said Imtiaz Ahmed, assistant vice-president, mortagages, Axis Bank. The bank's mortgage reference rate is pegged at 13.25 per cent.
"The 50 basis points reduction will not have any major impact on the bank's cost of funds. This offer is on floating rate loans, which can be hiked if cost of funds increase over time,'' said Asok Kumar, executive director, Axis Bank.
"These are marketing tricks to increase demand as interest rates on retail loans are far from easing. The interest rate stance will depend on the Reserve Bank of India's mid-term monetary policy steps. There is no hope of the regulator reducing rates,'' said a banking analyst. The RBI will announce the mid-term annual policy statement on October 30.
Public sector banks are under pressure from the government to reduce interest rates as there are signs of a demand slowdown. State Bank of India's (SBI) asset liability committee will be meeting next week to take a call on interest rates.
At present, SBI offers 50 basis points discount on home rates plus a reduction in processing charges in Mumbai and Goa circles since Ganesh Chaturthi. Bank of Baroda, Industrial Development Bank of India and State Bank of Bikaner and Jaipur have also revised mortgage rates downwards.
Meanwhile, Dena Bank has decided to cut its lending rates for fresh home loans, by 50 basis points from October 10.
The discount on lending rates, fixed as well as floating rate options, will be applicable till December 31, 2007. Canara Bank has also slashed its home loan rates by 50 basis points across tenures for fresh loans.
