Prabhakar Sinha/TNN
 
New Delhi, Oct 23: Home loan rates are likely to come down sooner or later as the liquidity condition has improved and repo rate cut by RBI has made banks' overnight borrowings cheaper.

The market leader in the home loan segment, ICICI Bank is also watching the situation in the money market and take a decision accordingly. The bank had increased its home loan rate for new customer by one percentage point to 13% on October 10 - just before the infusion of fresh liquidity and rate cut on the overnight fund for banks was effected.

A senior official of ICICI Bank said the bank had taken the rate hike decision at a time when interest rates were ruling at a very high level. But, now following RBI's measures, the condition has changed and the bank is keeping an eye on the cost of funds. He said if the cost of funds falls, the bank will take the decision accordingly.

Following the RBI and government's measures to infuse liquidity in the system, a couple of banks like the Punjab National Bank and Union Bank of India had cut the home loan rates by half a percentage point to around 12% in the last one week. A number of other PSU banks, including market leader, SBI, are also expected to cut rates.

CMD of Oriental Bank of Commerce Alok K Misra said the lending rate will be cut if the cost of funds comes down. If the easy liquidity condition persists, banks will start cutting the deposits rates, which in turn will lead to fall in lending rates.

An ICICI Bank spokesperson said the recent hike in the home loan rate will not affect the old customer as their rate of interest will remain unchanged. The one percentage point rise to 13% will increase the equated monthly instalment to Rs 1,172 per one lakh from Rs 1,101 at 12% level. The move is going to affect the real estate sector badly. ICICI Bank is among the top two lenders in the home loan segment. Its decision to increase the rate will affect the home loan market. Its main competitor HDFC lends at 11.75% to its customer.