IDBI Bank announces cut in interest rates on home loans

With demand for housing loans easing in view of high interest rates, banks have decided to slash rates to attract borrowers, especially during the forthcoming festive season.

IDBI Bank has just announced a 25 to 50 basis points cut in interest rates for its existing home loan customers. Earlier, Dena Bank had reduced its lending rate on home and automobile loans by 25 bps.

Banks and housing finance companies are increasingly seeking to tie borrowers to fixed-cum-floating rates, as interest rates appear to have peaked in India.
 
The Reserve Bank of India (RBI), the country's central bank, has hiked interest rates about a dozen times since March 2010. Analysts expect the bank to go for one final hike at its meet to review interest rates on October 25.

IDBI Bank has also followed the footsteps of HDFC Ltd, LIC Housing Finance and ICICI Bank by launching a fixed interest home loan scheme for new customers.
 
The new scheme, applicable between 15 October and 31 December, will charge borrowers under Rs25 lakh a fixed rate of 10.75 per cent, which is at par with its base rate. 

The rate for those opting for a two-year fixed rate will be 11 per cent. Borrowers can choose to peg their rate for the first or second year, and from the following year, it will be linked to the bank's base rate.

For its floating rate customers, the bank has cut interest rate by up to 50 bps, with loans under Rs25 lakh being available at 10.75 per cent. It has also waived processing fees for loans up to Rs.25 lakh.