Decision on teaser rates has to be combined: HDFC

HDFC Chairman Deepak Parekh said all lenders should withdraw teaser loan schemes or else the one who withdraws will lose business.

He was speaking on the sidelines of a press conference here. "Customers prefer dual rates where they can avail of debt at low rates initially," he said, adding there was a clear signal from the Reserve Bank of India (RBI) that it was not happy with the product.

HDFC home loan teaser rate scheme expires at the end of the month. The largest mortgage lender has extended the scheme four times since December last year. It charges 8.5 % in the first year and 9.25 % in the second year. In the following years, the borrower has to pay floating rates.

To discourage teaser loans, RBI has increased the provisioning for such loans from 0.4 % to two %. It has also capped the loan to value ratio for home loans at 80 %. For loans above 75 lakh, the risk weight has been increased to 125 %.

HDFC has access provisioning of Rs 253 crore. "We are maintaining 2.2 % margin. We don’t see any pressure on cost of funds," said Parekh.

National Housing Finance, the housing finance regulator, is planning to prescribe provisioning norms on teaser loans and cap the loan to value ratio of housing finance companies to prevent arbitrage.

Parekh dismissed any impact of the measures taken by RBI saying HDFC’s average loan to value at origination was 67 % and the average loan size Rs 18 lakh. "We have access provisioning of Rs 253 crore."

The country’s largest mortgage lender may not increase interest rates this financial year.