ICICI Bank cuts mortgage rate to 6.7%
Amid a rate war in the mortgage space, private sector lender ICICI Bank on Friday announced an interest rate cut to 6.7% for loans up to Rs 75 lakh. It is the lowest rate in 10 years at the bank and matches that of the State Bank of India (SBI) which on Monday lowered the rate for borrowers with high credit ratings. For loans over Rs 75 lakh, ICICI Bank applies a rate of 6.75% or more. Just like SBI, ICICI Bank also offers revised rates until March 31.
The struggle for market share in the home loan segment is not surprising given the industry’s weak demand for credit. While Kotak Mahindra Bank has lowered its starting rate on home loans to 6.65%, the Housing Development Finance Corporation (HDFC) has said it will apply rates starting at 6.75% for loans of any size. Analysts believe the rate cut is temporary and timed to attract customers while the benefits of stamp duty cuts are available. However, if business demand remains weak in the coming quarters, banks may be forced to undercut each other to increase their market share, they point out.
SBI Chairman Dinesh Khara recently observed that the bank intends to aggressively expand the mortgage portfolio, doubling it to Rs 10 lakh crore over the next five years.
As in most banks, mortgage interest rates at ICICI Bank vary depending on various parameters such as office scores, client profile and customer segments among others.
Ravi Narayanan, Head of Guaranteed Assets, ICICI Bank, said consumer demand to buy homes to live in had resurged in recent months. “We believe that with our fully digital home loan process, including instant sanction for clients of any bank, everyone will find it extremely convenient to take out a home loan with us,” said Naryanan. ICICI Bank’s mortgage portfolio crossed the 2 lakh-crore rupee mark in November 2020 and disbursements increased in the third quarter of FY21 compared to the second quarter of FY21. now obtains almost a third of new home loans digitally. The growth of the mortgage portfolio was also aided by the expansion of the bank’s presence across the country, including in Tier 2, 3 and 4 cities.