Comparison of interest rates
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HDFC’s floating rate loans look more attractive; whereas the fixed rate loan schemes offered by SBI seems more beneficial
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In response to SBI’s latest reduction of SBAR (State Bank Advance Rate) of 50 basis points and offering Home Loans at attractive interest rates under hybrid loan parameters, HDFC has announced reduction of interest on new home loans by 25 to 50 basis points. Without altering the Retail Prime Lending Rate (RPLR), which is 13.75%, the Housing Development Finance Corporation Ltd. (HDFC) has announced reduction in interest rates on fresh home loans as follows.
For floating rate home loans up to Rs 15 lakhs, the interest rate has been reduced to 8.75% against 9.25% charged earlier. For loans between Rs 15 lakhs and Rs 30 lakhs, the new rate is 9% (against 9.25% earlier) and loans above Rs 30 lakhs are priced at Rs 9.5% (against 9.75% earlier).
For example, for a 20- year home loan of Rs. 30 lacs, the borrower under floating rate scheme at SBI pays 8% for first year, 9% for 2nd and 3rd year and 9.75% from 4th year onwards. The average interest (considering existing SBAR) works out to 9.58%, whereas for the same loan, interest payable at HDFC would be 9%. For the same loan of Rs. 30 lacs, at SBI, the borrower under fixed rate scheme pays 8% for first year, 9% for 2nd and 3rd year and 10.75% (reset after every 5 years) from 4th year onwards. The average interest works out to 10.43%, whereas HDFC charges 13.75% interest for fixed rate home loans.
Compared to the new home loan schemes of State Bank of India, the HDFC’s floating rate loans look more attractive; whereas the fixed rate loan schemes offered by SBI seems more beneficial.
R. P. DESHPANDE
(The author is the Director of Institute of Home Finance and can be contacted at deshpanderp2007@gmail.com)
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