Housing Development Finance Corporation (HDFC) has slashed lending rates in the region of 50 to 100 basis points with effect from today, in line with falling interest rates after the announcement of the slack season monetary and credit policy.
The last time HDFC affected a lending rate cut was on September 22, 1997. The housing finance institution has, however, not cut its deposit rates. The rates on loans up to Rs 10,000 has been retained at 12.5 per cent. For the next slab of loans between Rs 10,001 and Rs two lakhs, the interest rate has been cut to 14 per cent from 15 per cent. Loans between Rs two lakh and Rs five lakh saw a 100 basis point cut in rates to 14.5 per cent.
For borrowals between Rs five lakh and Rs 10 lakh the interest rate has been cut by 50 basis points to 15.5 per cent and for loans of Rs 10 lakh and above the rate has been brought down to 15.5 per cent from 16.5 per cent.
Effectively, the slabs for Rs five lakh to Rs 10 lakh and Rs 10 lakh and above have been collapsed into one, carrying an interest rate of 15.5 per cent. HDFC has also cut interest rates on its Home Improvement Loan product by one percentage point across all maturities. Here the slabs and interest rates are fixed on the tenure of the loan rather than on the amount of the loan.
Loans with a maturity of three years will attract an interest rate of 11.5 per cent down from 12.5 per cent. Four year loans will attract an interest rate of 12.5 down from 13.5 per cent, five year loans will attract a rate of 13.5 per cent down from 14.5 per cent and loans with a maturity of six to eight years will carry a rate of 14.5 per cent as against 15.5 per cent earlier.
It is felt that the corporation might cut its deposit rate also in line with the falling interest rate scenario. Unless deposit rates are also cut, the margins of HDFC will come under pressure, analysts point out. However, it is pointed out that since HDFC has been increasingly going in for retail deposits it might not cut rates on the liabilities side.
