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PSBs may hike rates on 2nd home loans


PSBs may hike rates on 2nd home loans

Last updated: May 14 2007
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  • PSBs may hike rates on 2nd home loans

    Second home loans may soon cost more as some large public sector banks (PSBs) are contemplating a higher interest rate but those below Rs 20 lakh are likely to get cheaper, providing relief to lower and middle-classes.
    Taking a cue from the Union Bank of India, which has reduced its interest rate on home loans below Rs 20 lakh, a few large PSBs may follow suit. Smaller banks, however, appear unlikely to do so. Similarly, a higher rate of interest for second home loans also appears on the cards. Again it is the bigger PSBs which are believed to be considering such a move.

    -SBI charges the same rate for both first and second time home loans.

    -ICICI, a big-time home loans lender, has already indicated that it may consider a higher rate for second-time loans to discourage speculation in the real estate sector.

    -A Bank of Baroda official said reducing rates on loans below Rs 20 lakh would depend on factors like cost of funds for the bank. The official said charging a higher interest rate for second home loans was also under discussion’ but a decision either way will be taken only by end-May or early-June.

    -Bank of India (BoI), another big public sector lender, said it had not hiked its home loan rates when other banks did so in the past. Hence, there may not be a need to reduce them. Our rates are very competitive.

    Smaller PSBs like Central Bank, Dena Bank and the south-based Indian Bank, which cater to small ticket loans, said they may have no need to raise rates on second home loans since they do not receive many such applications. On reducing rates for loans below Rs 20 lakh, many of them said that with their rates already very competitive, a reduction could be contemplated only after taking a considered view of all factors.

    Second home loans too were not of much concern to smaller banks since majority of their loans were in the range of Rs 5-10 lakh. 90% of our loans are in the Rs 8-10 lakh range, however the bank may consider reducing rates below Rs 20 lakh.

    Central Bank of India said its rates were lower as compared to its peers. Most of the bank’s customers were first-time loanees and second time purchasers were very few with the average size of our loans in the range of Rs 5-10 lakh. The bank has no differential pricing as of now.

    In Indian Bank nearly 99% of the customers were first-time home buyers. A few large PSBs may reduce interest rates on home loans below Rs 20 lakhs.
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