ICICI, HDFC discontinue teaser rate scheme

After ICICI bank, the largest mortgage lender HDFC has also decided to discontinue the teaser rate scheme that entail cheaper home loans to new borrowers.

According to sources, HDFC's scheme of dual rate home loan, which was to expire today, will not be extended. Teaser rate is a special loan scheme under which a concessional rate is offered for a limited period to attract customers.

Under this offer, HDFC offered home loans at a fixed rate of 8.5 per cent up to March 31, 2011, 9.5 per cent for a period between April 1, 2011 and March 31, 2012 and the applicable floating rate for the balance term.

It may be recalled that in its policy review meeting last month, the RBI had voiced concern over the high risk of default on loans offered at teaser rates and had tightened the noose around this product.

Meanwhile, country's largest private lender ICICI Bank has also decided to discontinue teaser rate home scheme with immediate effect.

The bank had in October said that under the teaser rate scheme, home loan seekers had to pay 8.5 per cent in the first year, 9.25 per cent in the second year and 1.5 per cent over and above the base rate in the third year.