After SBI, HDFC extends teaser rate scheme

Despite the Reserve Bank of India’s (RBI’s) discomfort with teaser rates, they refuse to go away. A few days after State Bank of India (SBI) extended its 8 per cent home loan scheme, HDFC followed suit on Friday by extending its teaser rate home loan scheme till June 30.

Under the scheme, HDFC offers a fixed rate of 8.25 per cent up to March 2011, nine per cent for the next one year and the prevailing floating rate thereafter.

The offer will be available for all customers who avail of at least a part of the loan by June 30, according to an HDFC spokesperson. The scheme had expired last month.

SBI, which sparked the battle in the market for mortgages by introducing teaser loans in January 2009, is offering a fixed rate of 8 per cent for the first year, 9 per cent for the next two years and a floating rate thereafter.

Banks are trying to push home loans through special offers as demand is low. During the year up to February 26, housing loans grew 8.3 per cent, compared to 16 per cent growth in non-food gross bank credit.

Although popular with home loan seekers, teaser rates had drawn flak from RBI, which said they benefited only the new customers.

Bankers said SBI had pioneered the scheme at a time when liquidity was abundant but now RBI was trying to squeeze excess liquidity from the system by increasing policy rates.

Banks have already increased deposit rates and are expected to respond with rate hikes once the demand for loans increases in the second quarter.

A number of private sector lenders such as ICICI Bank, HDFC Bank and Axis Bank increased their home and auto loan rates in March, after they were faced with a rising interest rate scenario. This was even before RBI increased repo and reverse repo rates by 25 basis points in the same month.