The Hindu Business Line : HDFC fixed rate loan band at 7.75-8.5 %

CITING likely hardening of interest rates in the long-term, the Housing Development Finance Corporation (HDFC) has increased the interest band on its fixed rate loans to 7.75 per cent - - 8.5 per cent, from the earlier band of 7.5 per cent - - 8.5 per cent.

Interest rates of the floating rate products and the retail prime-lending rate have not been changed. "During the last month or so, the rates of interest in the economy have been showing signs of hardening and the inflation figures released last week also point in the same direction," said a news release from HDFC.

"Though we believe the rates will remain soft in the short-term, the long-term view is that the rates are likely to rise. This is reflected in the 10-year G-sec rates which are quoting at over 6 per cent."

"HDFC is in the business of long-term housing loans and when we lend at fixed rates for periods as long as 15 to 20 years, we need to keep in mind the long-term outlook on rates in order to avoid any possible mismatch," said the statement.

According to HDFC, "Other players in the home loan market offer fixed rate loans with a right to increase the rate in case of adverse money market conditions or even changes in their internal policies."

In comparison, HDFC offers two options at differential rates, one where HDFC has a right to increase rates but only in the event of extreme volatility in the money market conditions and the other, at a slightly higher rate where the rate is fixed for the entire term.

There is also a part-fixed and part-floating rate product to enable customers to hedge their risks in an environment when rates are likely to move up.

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