Nhb Cuts Refinance Rates By 50 Bps

The National Housing Bank (NHB) has slashed its refinance rates by 50 basis points. The interest rates now range from 8.5 per cent for loans up to Rs 1 lakh in rural areas to 10.75 per cent for loans up to Rs 20 lakh and above.

"Aligning itself to the market and driven by the emerging demand, NHB has reduced its refinance rate by 50 basis points across the board including upgradation and major repairs," NHB executive director R V Verma said.

While the interest rate has come down from 10.75 per cent to 10.25 per cent for loans between Rs 2 lakh and Rs 15 lakh, it has been reduced from 10.5 per cent to 10 per cent for loans between Rs 1lakh and Rs 2 lakh. Interest rate has been brought down from 11 per cent to 10.5 per cent for the Rs 15-20 lakh slab.

NHB also decided to extend conversion facility to the primary lending institutions permitting adjustment in refinance interest rate with conversion fees. The move will benefit housing finance institutions, agriculture and rural development banks and cooperative institutions with lower refinance rate of 11.5 per cent in respect of the refinance availed earlier at 13 per cent, he said.

The board has also decided to shorten the period of refinance by providing flexibility to HFCs in choosing the repayment period for refinance. The HFCs now have an option to choose repayment periods between 5-15 years. "This will greatly help the HFCs who have witnessed an average amortisation period of around 7-8 years on individual loan portfolios," Verma said.

In order to further encourage and strengthen the secondary mortgage market, NHB has drawn up plans to launch its third issue of securitisation of mortgage pool originated by Canfin Homes Ltd. The size of the issue is expected to be about Rs 100 crore.

The revised interest structure closer to the cost structure for commercial banks is likely to entice the banks for availing refinance from the apex institution for better asset liability management, Verma said. The decision was taken at the NHB meeting held on January 21.

All the measures are expected to boost demand for housing and also provide the much needed relief to HFCs in reducing their interest burden on high cost loans availed earlier, he added.