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Monday, December 15, 2008

Public sector banks cut home loan rates to prop up demand

Stung by a sagging demand for housing,
public sector banks today
slashed home loan rates
for a limited period
-- up to June 30, 2009 --
and capped interest rates at 8.5 per cent
for loans up to Rs 5 lakh
to encourage low-income housing.
For middle-income loans of Rs 5-20 lakh,
the interest rate has been capped at 9.25 per cent.

"The banks will also not charge any processing fee or pre-payment charges for loans up to Rs 20 lakh," State Bank's Chairman, O P Bhatt said, adding that free insurance cover would also be provided on loans under the above categories.

Freeze and Free!

Outlining the new housing loan package in accordance with the stimulus package announced by the Government on December 7, Bhatt said,
"There will be a freeze on any hike on these interest rates for a five-year period, but there will be no bar on the rates coming down further."
He said after the lock-in period of five years, the borrowers could look in for free or floating rates that could change in accordance with market conditions.

Own Contribution:

To make the package attractive, public sector banks would give the loans at a margin of 10 per cent up to Rs 5 lakh and 15 per cent for loans between Rs 5 lakh and Rs 20 lakh, and in either case, banks would offer free insurance cover, Bhatt said.

Only to New!

The above action would, however, be restricted only to new home loans and there would be no relief for existing borrowers, he said.PTI

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