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HDFC Discontinues Teaser Home Loan Rates

PTI 01 Dec 2010, 16:57:14 IST
Mumbai, Dec 1: India's largest pure-play mortgage player HDFC today decided not to extend its teaser or dual rate home loan scheme, which was extended four times since its launch in December 2009, from today.

"The scheme was valid up to November 30 and we decided not to extend it," a company spokesman said when contacted and refused to give more details.

Earlier in the day, ICICI Bank too announced discontinuance of its teaser rate scheme which entail cheaper loans to new borrowers, with immediate effect. It was offering 8.5 per cent first year, 9.25 per cent in the second year and 1.5 per cent over and above the base rate from then onwards.

HDFC had launched the dual rate loan product in December 2009 for new loans which offered a fixed rate of 8.25 to 8.85 per cent interest rate for the first year, 9 to 9.5 per cent in the second year and the applicable floating rate for the remaining period of the loan. When launched the first year attracted only 8.25 per cent and second year nine per cent.

Under this HDFC offered three slabs -- loans up to Rs 30 lakh, Rs 30-Rs 50 lakh and over Rs 50 lakh and above.

It may be recalled that the Reserve Bank was not comfortable with this scheme considering the probable default, from the beginning and since banks refused to heed to its advice even after bringing in the base rate system--a new benchmark lending rate below which a bank cannot lend--in the second quarter credit policy, RBI upped five times provisions for such loans from 0.4 per cent to two per cent of theĀ  exposure.

As of now among the major players, only State Bank is still offering this scheme. The SBI scheme is also up for review by the month end. PTI