3 Sep 2013, ET Bureau
MUMBAI: LIC Housing Finance has raised interest rates on home loans by 35 basis points but has spared its existing customers from a rate hike. The company has not hiked its prime lending rates – the rate which is linked to floating rate that is charged to customers- to protect the existing customers. It raised rates on two of its schemes – Bhagyalashmi Plus and Super Choice – and has also launched a new scheme wherein it would charge a fixed interest rate of 11.50% for 10 years.
Under ‘Bhagyalakshmi Plus’ scheme aimed at women borrowers, LIC Housing would charge 10.35% against 10% charged in the past.
If the first borrower is not a woman, the person can opt for ‘Super Choice’ scheme wherein LIC would charge 10.60% against 10.25% charged earlier. In both these schemes – Bhagyalakshmi Plus and Super Choice’ scheme – rates are fixed for first two years and floating rate thereafter.
“We do not have any plan to raise interest rates in immediate future because it will only add to the burden of our existing customers,” said V K Sharma, MD and CEO of LIC Housing speaking to ET. “But the current rates are not sustainable as it is hurting our margins.” He said that the move by LIC HF is also aimed take care of shareholders interest since raising rates for new customers would ensure healthy margins.
In the recent weeks, after Reserve Bank of India tightened the liquidity in the system, private banks and housing Finance companies like HDFC has raised interest rates on the home rates. For instance HDFC floating rate home loan is pegged at 10.40% for loans below Rs 30 lakhs and 10.65% for loans between Rs 30 to 75 lakhs.
At present, it charges 10.60% for loans above below Rs 75 lakhs and 11.10% for loans between Rs 75 lakhs and Rs 3 crore.
Meanwhile, the housing finance company is mainly owned by LIC, launched a ‘New Fixed 10’ scheme wherein the customer wherein interest rates would be fixed for ten years at 11.50%. Further, the customers would have an option to shift to the floating rate loan after five years.
However those wishing to take fixed rate loan for the entire tenure of the loan, the company charges 12.50% under the scheme ‘sure fixed scheme’.