The rate war for home loans have begun with HDFC upping its ante by

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extending its special home loan scheme to March 31, 2011.The scheme offers fixed and floating interest rate with the first year cost being 8.25 per cent and then 9.25 per cent for the seond year irrespective of the loan amount.For the remaing term of the loan it will revert back to the applicable floating rate. ICICI Bank which had a similar scheme is also expected to extend its scheme so that the bank is not pushed out of the competition.

On June 30, a day before the base rate came into effect, State Bank of India (SBI) the architect of of the special home loan scheme that rewrote the dynamics of the home loan market extended the scheme by three months upto September 2010. Under the special home loan scheme the bank was offering a dual product with fixed and floating component. For the first year the interest will be capped at 8 per cent and for the next two years it will be fixed at 9 per cent for all loans.

After the third year, the rates will revert to back to floating rates which is now fixed at 1.75 per cent above the base rate for loans upto Rs 50 lakhs which would be 9.25 per cent at the current rate and above Rs 50 lakhs it will be 2.25 per cent over the base rate, where the effective rate would be 9.75 per cent.

LIC Home Finance will offer floating interest rate for new customers on home loans up to Rs 1.50 crore will be 8.75 per cent. Earlier the special offer rates for loans above Rs 75 lacs up to Rs 1.50 crore was 9.75 per cent. For home loan borrowers opting for short-term fixed rate, LIC Home Finance offers loans at 8.90 per cent fixed up to March 31, 2010 for loans up to Rs 1.50 crore and thereafter the prevailing floating rate will apply. The earlier rate of interest for loans above Rs 75 lacs up to Rs. 1.50 crore was 9.90 per cent. For customers wanting fixed lending rate for a considerable long period, LIC Housing Finance has brought out a product where the lending rates are fixed at 9.25 per cent for 5 years and thereafter on floating basis.