SBI, LIC HF cut home loan rates

State Bank of India (SBIN.NS : 2205 +65.75), the country's largest lender, on Tuesday launched two new home loan products SBI Easy Home Loan and SBI Advantage Home Loan for buyers in the sub-Rs 30-lakh and over Rs 30-lakh category, with processing fee for both waived until September 30, while home mortgage lender LIC Housing Finance has reduced the interest rates for its existing borrowers.

Aiming at 20% jump in its home loan portfolio, SBI also extended the benefit of reduced rates to its boroowers up to the fourth year.

In SBI Easy Home Loan, the interest rate charged on daily reducing balance would be 8% per annum for the first year and 9% fixed for the second and third years. From the fourth year onwards, the customer can choose between a floating rate of 2% below the State Bank Advance Rate (SBAR) and a fixed rate of 1% below SBAR with a five-year reset.

The indicative EMI for the first year would be Rs 836 and for the next two-years Rs 898 for a loan tenure of 20-years. SBAR is 11.75% with effect from June 29.

SBI Advantage Home, targeted at premium home buyers (above Rs 30-lakh), will have an 8% fixed interest for the first year and 9.5% for the second and third years.

Both the schemes will be valid until September 30, 2009 and depending on the response, the bank will decide whether to extend them.

The bank has a home loan portfolio of over Rs 56,000 crore. The growth rate last year was 21% and SBI was the largest originator of home loans with a growth of Rs 9,370 crore. The earlier scheme called SBI Special, launched on December 16, 2008, under the umbrella of IBA, to stimulate growth in the affordable housing sector was scheduled to close on Tuesday, June 30. Talking to FE, a senior official of the bank said that after the launch of the two schemes, the bank is looking at increasing its home loan segment by 20% by the fiscal-end.

Also, the official said the bank is targeting a credit offtake of Rs 1,000-1,500 crore in the home finance segment.

Commenting on latest rate reduction, RR Nair, director and chief executive, LIC Housing Finance, said that the company's existing PLR is 12.55% and the rate after the reduction will be 9.5% to 10%.

Nearly 98% LIC Housing Finance borrowers have opted for a floating rate of interest.