Home loans may become cheaper : Global Organisation for Pravasis Urakam (GOPUR)

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Published On: Friday, August 03, 2012

Home loans may become cheaper

NEW DELHI: A day after SBI reduced home and auto loanrates, the National Housing Bank, the regulator for home finance firms, pared the refinance rate under a special scheme by 75-100 basis points, signalling the possibility of a further rate cut. 

Besides, SBI said that it would cut interest rates on fixed deposits by 25 basis points (100 basis points equal one percentage point) that have tenure of over 5 years, adding to the expectation that rates would go down in the coming weeks. 

National Housing Bank (NHB), the regulator for home finance firms, said in a statement on Thursday that the refinance rate, which is the rate that it charges banks and home finance firms, for low-income housing was being reduced and officials indicated that this could be expanded to other schemes as well. 


Refinance, however, accounts for only a small part of the overall funds that these mortgage players access. A large share of the funding for housing finance firms comes from the money market and retail deposits. 

The move from NHB along with SBI's rate cut is expected to prod other banks to start paring rates, especially when demand for loans has slowed down because of high interest rates and continuously rising real estate prices, reducing affordability. 

At least two bank chiefs told TOI that they were looking at the possibility of cutting rates over the next few days, especially after SBI, the country's largest lender, signaled that it is aggressively hunting for a larger share of the home loan market. 

The Reserve Bank of India's (RBI) move to reduce the statutory liquidity ratio, which is the share of funds parked in government securities, by a percentage point is expected to release Rs 60,000 crore into the system that banks can deployed for lending. 

Although the central bank has not tinkered with policy rates in the last two policy reviews, reduction of the cash reserve ratio, or the proportion of funds kept as cash, by 1.25 percentage points too has helped lower the cost of funds for banks. In addition, RBI has told that banks that it wants the benefits of reduction in rates to be passed on to borrowers.


Source, credits and thanks to : Times of India

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Posted on Friday, August 03, 2012. Labelled under . Feel free to leave a response

1 comments for "Home loans may become cheaper"

  1. still, take care and check the terms

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