High home loan demand triggers interest rate war
New Delhi- A surge in demand for home loans in October has triggered a rate war. A host of banks are offering loans at 6.85% to 7%, resulting in the spread between these and government bonds narrowing down to 80 basis points (100bps = 1 percentage point).
Banks say that home loans are a safe bet and this is the only segment growing in double digits. Demand has been triggered because of work from home (WFH) needs, discounts by builders and interest rates being at an all-time low.
The frequent changes in pricing among lenders seem to indicate that a rate war is brewing as the banks compete to grow the home loan book, which is seen as the safest category of loans. In the last few days, Bank of Baroda had slashed their home loans to 6.85%.
SBI recently announced discounts of up to 20 bps on loans above Rs 75 lakh for customers. HDFC also offers loans at 6.9%.