ICICI Bank on Monday reduced the spread over the one-year marginal cost of funds-based lending rate (MCLR) for interest rates on home loans of up to Rs 30 lakh by 30 basis points (bps). Effective Monday, housing loans of up to Rs 30 lakh will be available at an interest rate of 8.35% for women and 8.40% for others, down from 8.65% and 8.7%, respectively. These rates will apply to salaried borrowers, while self-employed borrowers will have to shell out 8.55% for loans up to Rs 30 lakh. Women belonging to the latter category will be charged 8.5%. The lending rate remains unchanged for loan amounts between Rs 30 lakh and Rs 75 lakh. The move brings ICICI’s home loan rates in the affordable segment at par with larger rival State Bank of India, which had reduced rates last week. Mortgage specialist HDFC charges between 8.5% and 9% for a loan of up to Rs 75 lakh.
ICICI will also give new home loan borrowers the option of linking their loans to either the six-month MCLR or the one-year MCLR. This, however, will make little difference to the borrower as the spread over the six-month MCLR will be 5 bps higher than that over the one-year MCLR. Most banks link home loans to their one-year MCLR. While ICICI chose to leave its MCLRs unchanged for May after its monthly review of the new benchmark, it had revised them in January, effecting a steep 70-bps cut to its one-year MCLR, and bringing it down to 8.2%. Its six-month MCLR stands at 8.15%.
Lenders have of late tried to push lending for housing, thus making mortgages more affordable. According to a report by CLSA, mortgage rates have come down by 150 bps in the last two years and are now at 12-year lows, and this is gradually improving affordability. Every 100 bps of mortgage rate cut is equal to a 5-6% price cut, CLSA has noted. ICICI Bank managing director Chanda Kochhar said the bank is committed to supporting the government’s vision to provide housing for all by 2022.
“In line with this commitment, we have reduced the home loan interest rates for the affordable housing segment. With this announcement, customers of the economically weaker section and low-income group (LIG) can avail of the dual benefit of low-interest rates from us and the credit-linked subsidy under the Pradhan Mantri Awas Yojana,” she said. This initiative, along with the bank’s expansion of home loan business in tier II cities, will empower a larger section of customers to realise the dream of owning a new home, Kochhar said.
HDFC follows suit
Pureplay mortage player HDFC on Monday followed suit of its rivals and lowered new low-cost home loan prices by 15 bps to 8.35% for women borrowers and by 10 bps for men, thereby matching the rates offered by SBI last week and ICICI Bank earlier in the day. HDFC has lowered its mortgage pricing for new low-cost home loans to 8.35% from 8.50% for loan below Rs 30 lakh for women borrowers and by 10 bps to 8.40% for men. The new rates will be applicable with immediate effect. (With PTI inputs)