Mortgage company LIC Housing Finance on Friday joined the teaser home loan bandwagon by introducing 'New Advantage 5', under which the interest rate would remain fixed for the first five years.
New Advantage 5 is offered at fixed interest rates for the first five years and thereafter at floating rates, LIC Housing Finance said in a statement.
The floating rates will be linked to the Prime Lending Rate prevailing at the time of the switch, it said.
The scheme is available till December 31, with a condition that the first disbursement should be availed by the customer on or before January 15, 2012, it added.
With the launch of the new product, LIC Housing Finance becomes the third lender to offer such a scheme.
Earlier this week, country's biggest mortgage firm HDFC launched such product in the market.
ICICI Bank was the first to introduce a fixed home loan scheme last month, after SBI discontinued with it in April.
LIC Housing Finance further said loans of up to Rs 30 lakh will have a fixed interest rate of 11.15 per cent for a five-year period.
Similarly, loans in the range of Rs 30 lakh to Rs 75 lakh will have fixed interest rates of 11.40 per cent and Rs 75-150 lakh loans will attract 11.65 per cent for a five-year period.
Clarifying whether such products are teaser or not, the RBI said loans that are fixed in the initial years and become floating later would be considered as teaser loans, and banks must make provisions as mandated by the regulator.
"Interest rates that are a mixture of these two (fixed and floating) are called teaser rates," RBI Deputy Governor K C Chakrabarty had recently said.
"If there are rules, they (teaser loan products) will attract additional provisioning," he had added.
He, however, clarified that such products are legitimate and the regulator has not banned such products, but only laid down rules to provide for such loans.
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