Three years after Axis Bank launched its 20-year fixed-rate home loan product called ‘Nishchint’, India’s third largest private sector lender has come up with a similar scheme, but only for the affordable housing segment this time.
Axis Bank’s latest offering is a 20-year home loan product at a fixed interest rate of 10.4%. The maximum loan amount under this scheme would be Rs 50 lakh for metros and Rs 40 lakh in non-metros, the bank said in a release.
For such loan products, the interest rate will not sensitive to changes in the bank’s base rate. Axis Bank’s base rate is currently 10.15%.
The product is available to salaried customers at 10.4% on all plain-vanilla home loan offerings, including balance transfer schemes, while for the self-employed, it is available at interest rates starting from 10.65% for similar variants, the release said.
ICICI Bank launched a similar fixed-rate product in September wherein the bank offered home loans at a fixed rate of 10.25%.
While a fixed-rate loan product may seem unappealing to customers currently when most banks are indicating a cut in lending rates, Axis Bank is betting on the logic that retail customers would want predictability in their EMIs, which floating rate products do not offer.
“If you think about the affordable housing client, they are clients who actually want stability and predictability with respect to EMI amounts that get charged to them month on month,” said Jairam Sridharan, president, retail lending & payments, Axis Bank.
The slew of deposit rate cuts recently by banks that point to base rate cuts down the line gives a chance to retail customers to borrow at cheaper rates. “Our proposition then was and continues to be — why should the end consumer take a view on where interest rates are headed? Right now, it seems to be a little bit of consensus opinion that rates might come down. But who knows about the rates three or five years from now,” said Sridharan.