Bringing back memories of the much-reviled teaser rate home loans, ICICI Bank today launched two home loan products, which give borrowers the option of a fixed interest rate for the first two years.
However, it is not a teaser rate loan in the strictest sense as it does not front-load a lowball rate as an inducement to unsuspecting home loan borrowers.
Under the one-year fixed rate home loan, the customer can take a loan at 10.50 per cent for an amount less than or equal to Rs 25 lakh, 11 per cent for higher than Rs 25 lakh and less than or equal to Rs 75 lakh, and 11.50 per cent for above Rs 75 lakh.
Under the two-year fixed rate scheme, the customer can take a loan at 10.75 per cent for an amount less than or equal to Rs 25 lakh, 11.25 per cent for above Rs 25 lakh and less than or equal to Rs 75 lakh, and 11.75 per cent for an amount higher than Rs 75 lakh.
On completion of fixed rate period, loans will take on a floating interest that will be linked to the base rate.
Borrowers will also have to pay a margin above the base rate, which will be decided at the time of loan sanctioning.
The new products will be available from Friday, ICICI Bank said, adding that the fixed interest products are in addition to the already available floating products.
The notorious teaser rate loan was the brainchild of the State Bank of India and its former chairman P. Bhatt. It was launched in 2009 with a fixed interest rate component that was as low as 8 per cent for the first year. It morphed into a floating rate for the remaining term of the loan.
However, the RBI came down on these schemes as it was concerned that borrowers might find it difficult to service the loans once the normal rate kicked in.
With interest rates turning expensive and observers fearing a couple of more rate hikes from the apex bank, ICICI Bank’s latest move seems designed to carve out a greater market share and acquire customers.
The lender said that fixed income rates would shield customers from frequent changes in home loan interest rates and protect them from any rise in interest rates over the next one or two years.
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