LIC Housing Finance has increased interest rates in some of its schemes and created a separate slab for loans above Rs 75 lakh post the tightening in home loan lending norms.
The Reserve Bank of India had tightened home loan regulations. It had increased the risk weight on loans above Rs 75 lakh to 125 per cent, capped the loan to value ratio at 80 per cent and introduced a 2 per cent provisioning for ‘teaser' loans.
NHB is also planning to impose similar regulations on housing finance companies.
The impact of the increase in the risk weightage will be around 10 basis points for LIC Housing Finance and to that extent, they need to increase capital.
It has split its 9.25 per cent fixed advantage scheme into three slabs. For loans up to Rs 15 lakh, the interest rate will be 9.25 per cent. For loans between Rs 15-75 lakh, the rate will be 9.5 per cent and for loans above Rs 75 lakh, the rate will be 9.75 per cent. In the earlier version of the scheme, the rate was fixed at 9.25 per cent for loans up to Rs 1.5 crore.
For loans up to Rs 15 lakh, they get refinance from National Housing Bank under rural housing, which is a cheaper source of funding when compared to the market rate.
Other players may also increase rates or resort to differential pricing, depending on the impact on each lender.
Festival offer scheme
Anticipating a pressure on margins due to additional provisioning on ‘teaser home loan' schemes, LIC HF has also revised its festival offer scheme where rate was fixed at 8.25 per cent till March 2011 after which the floating rate was applicable. For loans up to Rs 75 lakh, the interest will be fixed at 8.75 per cent and for above Rs 75 lakh at 9.25 per cent till March 2011.
For its scheme where the interest rate was fixed at 8.9 per cent till March 2012 for loans up to Rs 1.5 crore, the company has increased the lending rate in the above Rs 75 lakh category to 9.4 per cent.
The schemes are open till November 30 after which the company will take a relook.
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