HDFC brings back teaser home loans

Application date runs till the time SBI’s like offer is open.

Just a month after ending it, Housing Development and Finance Corporation (HDFC) has opted to re-introduce its fixed-cum-floating loan scheme, refuelling the battle for the pole position in the home loan market.

Customers will be offered a fixed rate of 8.35 per cent up to March 31, 2011, 9 per cent for the year from then to March 31, 2012, and the prevailing floating rate thereafter. This is for all new home loan customers who apply before April 30, 2010, and take at least a part-disbursement before June 30.

HDFC will also allow existing customers whose loans were fully undisbursed as of April 14 to shift to this product without any fees. The offer is valid till the end of the month, which is also when State Bank of India’s (SBI’s) special home loan scheme expires.
 

TAKE YOUR PICK
Loan amount	Rs 30 lakh
Term of loan	20 years
HDFC		SBI
EMI for 1st year	25,562	EMI for 1st year	25,094
EMI for 2nd year	26,943	EMI for 2nd year	26,925
EMI for 3rd year*	26,943	EMI for 3rd year	26,925
EMI 4th year onwards*	26,943	EMI 4th year onwards*	28,678
(All figures in Rs)                                  *at prevailing floating rate

Said Renu Sud Karnad, managing director of HDFC: “The response to the earlier dual rate scheme was overwhelming and with the cost of funds permitting us to offer a lower initial fixed rate, we have introduced the new scheme.”

The existing floating rate product continues without any change, where the rates are 8.75 per cent for loans up to Rs 30 lakh, 9 per cent for loans between Rs 30 lakh and Rs 50 lakh and 9.25 per cent for loans of Rs 50 lakh and above.

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

In HDFC’s new scheme, a loan of Rs 30 lakh to be repaid over 20 years requires an equated monthly installment (EMI) of Rs 25,562 for the first year, followed by an EMI of Rs 26,943 for the second year. Since HDFC’s current floating rate is the same as the second-year fixed rate of 9 per cent, the EMI for the remaining tenor of the loan is also Rs 26,943.

In comparison, for a loan of Rs 30 lakh to be repaid over 20 years, the EMI on an SBI loan works out to Rs 25,094 for the first year and Rs 26,925 for second and third years. Thereafter, the EMI is Rs 28,678 at the bank’s current floating home loan rate of 10 per cent.

HDFC and SBI are the only two lenders still offering teaser home loan schemes. A number of private sector lenders such as ICICI Bank, HDFC Bank and Axis Bank increased their home and auto loans last month after they were faced with a rising interest rate scenario. This was even before the Reserve Bank of India increased repo and reverse repo rates by 25 basis points last month. Bankers are expecting further tightening of policy rates in the monetary policy next week.