Decline in home loan rates likely

Is another round of home-loan rate cuts in the offing? Seems so. This time, by smaller players in the segment. The National Housing Bank (NHB) has reduced its refinance rates for smaller housing finance companies (HFCs) by 30 to 80 basis points (bps).

This will help these HFCs reduce and align their rates close to the rates offered by the big players in the home loan segment. A few have already decided to do so. The new refinance rates are effective April 19, NHB said in a communique to HFCs on Monday. The revised rates are applicable to all HFCs, except for the Housing Development Finance Corporation (HDFC) and LIC Housing Finance (LICHF), which have the highest six-star rating. This will reduce the cost of funds for the HFCs. With a lower refinance rate, the likes of DHFL Vysya Housing Finance are contemplating reducing their home loan rates. When contacted, the company’s managing director R Nambirajan hinted at a 25-50 bps cut. “Our board will meet soon to take a final call” he said, adding the reduction would give some cushion to smaller players.

Dewan Housing Finance Corporation managing director Kapil Wadhawan was, however, non-committal. “We have to examine our cost of funds. At this point, it’s difficult to say anything. I am not ruling it (rate cut) out. I am not committing either”, said Wadhawan.