Lenders rush in with dual-rate home loans as rates peak in India

With interest rates in India appearing to have peaked, banks are rushing in with dual-rate housing loans, hoping to tie-up prospective borrowers to peak rates of interest for a few years.

LIC Housing Finance (LICHF) is the latest to come out with its dual-rate scheme for borrowers, following the footsteps of the other two top mortgage lenders, ICICI Bank and HDFC Ltd.

The company, a subsidiary of state-owned life insurance giant, Life Insurance Company of India (LIC), launched 'New Advantage 5,' offering loans at a fixed rate of interest for the first five years and floating rates thereafter.

The floating rates will be linked to the prime lending rate prevailing at the time of the switch.

However, 'New Advantage 5,' will be available only till the end of the year. For loans up to Rs30 lakh, LICHF will charge a fixed interest rate of 11.15 per cent in the first five years; it will charge 11.4 per cent for loans above Rs.30 lakh, but less than Rs.75 lakh; and for loans between Rs.75 lakh and Rs.1.5 crore, it will charge a rate of 11.65 per cent.

According to V K Sharma, director and chief executive, LICHF, the company had launched 'Advantage 5' last year and had disbursed about Rs12,000 crore under the scheme.