HFCs not to bring any rise in home loan rates
By Joseph Samson
Aug 19, 2010
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Interest rate hike seems to be unlikely for home loans offered by housing finance companies (HFCs), although the current scenario is witnessing a rise in interest rates by banks.

The regulator of these HFCs, National Housing Bank (NHB) will not be succumbing to the same path immediately.

"There is no real rush on the part of HFCs to raise rates. It will depend on their cost of funds," RV Verma, executive director of NHB said.

According to Verma, the HFCs would like to act as spectators on what steps are taken by banks on base rate before they come to any decision for hike in lending rates.

"Over 50 per cent of HFC funding comes from banks. If banks raise their base rates when they conduct their next round of review, the cost of funds of HFCs will be impacted. That will have a bearing on the decision of most HFCs," he said.

Verma feels that the next review will witness a rise in base rates of banks following the current trend of deposit rate hike adopted by them which is surely going to increase their cost of funds.

Benchmark prime lending rates (BPLR) have been raised by many lenders in the recent past incuding the likes of State Bank of India, ICICI Bank, Punjab National Bank, Union Bank and IDBI Bank.

RR Nair, director and chief executive officer of LIC Housing Finance said, "We do not adopt the policy of changing interest rates depending on market movement. For our existing customers, we review our rates once at the beginning of each quarter."

"We have to take a view on rates on new loans," Nair said.


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