LIC Housing Finance cuts lending rates for new borrowers by 100 bps

After banks now the housing finance are reducing lending rates for the borrowers. LIC Housing Finance (LICHF) has announced a cut in lending rates for new borrowers by 100 basis points across various loan categories. After this cut home loans up to Rs 30 lakh, irrespective of the tenure, will get cheaper by 100 bps at 8.75 per cent, whereas for loans above Rs 30 lakh, the rates have reduced by 9.75 per cent as against 10.75 per cent earlier. The new rates have come into effect from February 1.

LIC Housing Director & CEO R R Nair remarked, “Earlier, similar loans with tenure up to five years charged 9.25 per cent and loans with tenure between five and 20 years attracted 9.75 per cent. Now we have decided to aggregate the two schemes and charge same interest rate”. Around 80 per cent of LICHF’s loans come under the Rs 30-lakh category, with an average loan size at Rs 16 lakh.

Meanwhile after the meeting with acting Finance Minister Pranab Mukherjee, many public sector bank chiefs, including UCO Bank and Corporation Bank, had signaled a cut of 50-100 bps in lending rate.

State Bank of India has already announced 8% cut on home loans for a year, irrespective of tenure and amount.

The offer announced by the SBI does not provide any benefit to the existing borrowers but it will be reviewing the decision on April 1.

Nair said, “We have passed on the benefit of incremental reduction in costs to the new borrowers. We always take a quarterly review of the lending rates for the existing borrowers, as we take into account the average cost of funds which is next due in April”.

Earlier on January 1, the company had announced cut in lending rates for existing borrowers, which is at present in the range of 10.75-11.25 per cent, by 75 bps.

In December quarter, the firm attained a 26.70 per cent rise in net profit at Rs 134.33 crore and distributed Rs 1,944 crore. The firm’s total borrowing in 2008-09 fiscal year would go up to Rs 11,400 crore as compared to Rs 7,490 crore last year.

Nair added, “The repayment outgo has increased with rising costs, so our borrowings for FY09 have increased. We have already borrowed Rs 8,800 crore in FY09 and we would require another Rs 2,500 crore to support our annual disbursement target of Rs 10,000 crore.”