Bank of India and Axis Bank have rung in the new year with special

RELATED ARTICLES Andhra Bank profit down 8% at Rs 303 cr No change in EMIs, banks to have more funds HDFC Bank net up 31% on retail boom

home loan schemes at reduced interest rates. While Bank of India (BoI) has reduced interest rates to 8 per cent fixed for two years, Axis Bank is offering home loans at 8.25 per cent fixed for two years for loans up to Rs 30 lakh. Earlier, Axis Bank had a rate of 8 per cent for the first year and 8.75 per cent for the second year, while Bank of India had a rate of 8.5 per cent. While the Bank of India scheme closes at the end of February, the Axis Bank offer is open till March 31,2010.

“We do not expect interest rates to harden in the immediate future, so we will be able to absorb the additional costs if there are any. Our cost of funds also have been coming down, so we can pass the benefits comfortably to customers. This is also an invitation scheme to attract home loan customers. After we have a sizeable pool of long-term customers, we will also look at selling third-party products and other loan products of the bank,” said N Narendran, executive director of Bank of India

While Bank of India will have an 8 per cent interest rate scheme fixed for two years on loans up to Rs 30 lakh, for loans above Rs 30 lakh, the rate will be 8.25 per cent fixed for two years. The rate is applicable on all loans taken between January and February. After the first two years, the rates would revert back to the prevalent rates at that time.

The Power Advantage Home Loan scheme from Axis Bank offers home loans at a fixed interest rate of 8.25 per cent per year for the first two years and a floating rate of interest. After completion of the first two years, the floating rate of interest would be 350 basis point less than the mortgage reference rate (MRR) – the retail reference rate, which now works out to 8.75 per cent, for loans up to Rs 30 lakh. For loans above Rs 30 lakh, it will be 300 basis points less than the MRR, which works out to 9.25 per cent.

At Bank of India, at the end of the first two years, the rates will revert back to the floating rate prevalent at that time. The floating reference rate, the benchmark rate to which the floating loans are linked to is at present 12 per cent.“Our focus is on the middle-income category customers. We want to grow the home loan book of the bank, which is now Rs 7,700 crore,” said Bank of India's Narendran. The bank will market the scheme through its network of 3,200 branches, of which 62 per cent are in rural and semi-urban areas.