Huge Profits for Lender, If home loans shift to floating rates
Housing loan banks like HDFC and LIC Housing Finance are probable to see a noticeable growth in their profitability as dual-rate home loans come up for re-pricing at higher rates this financial year.
Leader of Home finance, HDFC Limited, has about 4-5 dual-rate home loan products introduced since December 2009 that offer loans at interest rates of 8.25-9.5 % through March 31, 2012. These loans have now gone into ‘floating’ mode, starting April 1, 2012.
HDFC’s retail prime lending rate, against which the loans are benchmarked, stands at 16.5 %. This translates into floating rates of between 11.25-11.75 % for different categories of borrowers.
HDFC has around Rs 20,000-22,000 Cr loans outstanding under these dual rate hdfc home loan products or one-fifth of its total retail loan book.
On the other hand, LIC Housing Finance has about Rs 10,000-12,000 Cr worth of loans coming up for re-pricing at higher interest rates under its Fix-o-Floaty scheme in FY-13. Of this, loans worth Rs 2,500 cr will get re-priced in the first quarter itself.
State Bank of India (SBI), country’s largest mortgage lender, commanding 18 % market share, also has nearly Rs 20,000-25,000 Cr of home loans under its teaser rate scheme. This, too, is scheduled to be re-priced this fiscal, likely at 9-9.5 %.
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In last, question arises whether these lenders pass on these benefits to borrower’s remains. While SBI does not see much room for reducing lending rates in the home loan category.
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