The largest lender of the country, State Bank of India has extended its teaser home loan scheme till December 31, 2010. The scheme was earlier going to end in September.

"We did a cost analysis of our funds and realised that it is possible to continue with the special home loan scheme without being hit on our net interest margin," said a senior SBI official.

The teaser loan scheme gives the borrower home loan at 8% interest for the first year, 9% for the second and third years and thereafter a floating rate which would be decided by the bank.

With the aid of this special loan scheme, SBI has been able to maintain the largest home loan book in the country worth Rs 74,669 crore with the loan book growing by Rs 3,476 crore sequentially over the fourth quarter on a year on year basis.

One big reason for banks to continue with these rates is to give yet another push to credit offtake which is still slackened in pace.

State Bank of Hyderabad, an associate bank of SBI has dipped its home loan rate by 25 basis points. The bank would be offering home loans at 8.25% (fixed ) for the first year. This festive offer loan is valid till November 15.

Under this campaign, SBH will offer a fixed rate of interest at 8.25 per cent for first year, 9.25 per cent (floating) for second and third year for loans up to Rs 50 lakh. For loans above Rs 50 lakh, the bank will offer floating rate of interest at 9.5 per cent for second and third year.

Bhagwathi Rao Sandilya, assistant GM (personal banking) at SBH, said, "We feel that existing market conditions are conducive for this campaign. During Dussehra and Diwali, there is a spike in home buying. Therefore, we want to cash in on this trend with the reduced teaser rate. However, we don't intend to extend this offer beyond two months in the hardening interest rate environment. We expect housing loan business to the tune of Rs 300 crore from this campaign alone."