Axis cuts first-year home loan rate to 8%

MUMBAI: In a bid to grab market share, Axis Bank has dropped its home loan rates to 8% for the first year. The announcement came within days of

the central bank signalling tighter monetary conditions going ahead. The bank has also extended maturity of loans to 25 years.

In a related move, Bank of Rajasthan, a much smaller player, is offering home loans at 7.5% for the first year, 8.50% for the second and third year and 8.75% for fourth year and onwards, which is applicable for all maturity periods on the fresh loans.

“More young people want to lock into assets and they wanted an extension of the repayment schedule. This also enables us to lock into the mass affluent class of customers,” says Manju Srivatsa, president, retail banking, Axis Bank. The bank currently does Rs 600 crore of home loans monthly. This is against Rs 350-400 crore a few months before. The new 8% scheme of the bank is valid till December 2010.

From the second year, the loans will carry a floating rate of interest based on the bank’s ‘mortgage reference rate (MRR)’. The current MRR rate for loans up to Rs 30 lakh is 8.75% and 9.25% for loan amounts above Rs 30 lakh. Axis has launched a new ‘step down product’ where a higher EMI is charged in initial years on the basis of a combined family income.

These loans target families where parents support repayment of a loan taken together with their offspring. Incidentally, the customer can close the loan before its maturity with no prepayment penalty being charged by the bank.