The festival season ended long ago, but the festival loan schemes continue. Banks are yet to withdraw their fixed-cum-floating rate home loan schemes, ostensibly because demand remains strong.

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Housing Development Finance Corporation (HDFC), which had launched its dual-rate product Fixed First in September last year, has extended the deadline to March 31. The product, which had an application deadline of October 31 at launch, has seen extensions every month since then.

For loans up to `30 lakh, HDFC has fixed the interest rate at 10.75% for three years and 11.25% for five; for loans between `30 lakh and `75 lakh, the rate is 11.25% for three years and 11.5% for five; and for loans above `75 lakh, the rate is 11.75%.

The HDFC management has said earlier that a decision on the future of the product would be taken based on the Reserve Bank of India’s decision on lending rates.

Similarly, private sector ICICI Bank, the second-largest lender in the country, is yet to withdraw the special fixed rate product it had launched in August. The product offers customers an option to lock in with a fixed rate for the first one or two years of the loan duration and then move to a floating rate.

A source in the know of the development, in fact, said that the product is expected to be around for a few more months.

For loans up to `25 lakh, ICICI charges a fixed rate of 10.5% under the one-year option and 10.75% under the two-year option; for loans up to `25-75 lakh the rate is 11% for one year and 11.25% for two years; loans amounting to `75 lakh and above are charged at 11.5% in both cases.

Ditto with LIC Housing Finance, which continues to sell New Advantage 5, which it had launched in September.     Turn to Page 14

“This is because the product has seen immense demand from customers,” said V K Sharma, director and chief executive, while adding that it is looking at developing newer products with competitive rates to boost its advances.

Experts, however, cite additional profitability as the reason for continuing with the loans.

“I do not think the sale of these products have been extended because of customer demand. In a falling interest rate scenario, the sale of such products will help in maintaining profitability and margins,” said Rajiv Mehta, analyst with local brokerage, India Infoline.

As for customers, experts believe such products don’t make sense today as they would be forced to pay higher rates even after the banking regulator decides to cut lending rates.

“These schemes were launched to lure customers in a high interest rate scenario. For the customer, these schemes do not make sense because you are locked in for 3-5 years on a certain interest rate and a year down the line interest rates will be much lower than today. By launching these schemes only the banks and housing finance companies are making money,” said Suresh Sadgopan, who runs Ladder 7 Financial Advisors.