Close on the heels of public sector banks slashing their home loan rates, LIC Housing Finance [Get Quote], has announced a 1.75-2.25 per cent cut in its lending rates for home loans up to to Rs 20 lakh (Rs 2 million) from December 17.

"We have reduced our lending rates with effect from December 17. For a five-year term, our lending rate for loans up to Rs 20 lakh is 9.25 per cent and for those beyond five years, the rates will be 9.75 per cent," LIC Housing Finance's director and chief executive, R R Nair, told PTI.

For loans above Rs 20 lakh, the rate has been reduced from 11.5 per cent to 11.25 per cent, Nair said.

Public sector banks recently cut their lending rates on home loans upto Rs 5 lakh (Rs 500,000) to 8.5 per cent and loans between Rs 5-20 lakh to 9.25 per cent for the first five years after which the lending rates will be reset.

The scheme, which is applicable for loans availed till June 30, also offers free life insurance cover and exemption from pre-payment penalties to borrowers in these categories.

"We are offering floating rates for home loans. Within a three-six months period it will be linked to prime lending rates (PLR) minus 3 per cent or 2.5 per cent, depending upon the customer profile," Nair said.

The rates will be reviewed on April 1 or July 1 next, he said.

"Though the government has directed public sector banks to give five year fixed rate, we cannot give fixed rates for five years because of possible uncertainties in market trends," Nair said.