HDFC has cut floating new home loan rates by 50 bps. IDBI & BoB last week slashed rates by 50 bps. ICICI Bank has introduced floating rates on auto loans at 50 bps lower than fixed rate products.

Why the cut?
Home loans have grown at CAGR of 30% since 2001. Last 2 quaters growth has slowed down to 20%. Higher interest rates & rising property prices questioned affordability. (Volumes took a hit)

Banks have also seen their cost of deposits coming down which have softened their cost of funds. For some banks( like SBI), it may be a mode to garner lost market share

Impact
With interest rates having peaked out, bank margins may still be under pressure. Floating rate loans get re-priced immediately, but reduction in cost of deposits will take time to get re-priced (Pvt banks can re-price faster than PSU banks- favor those with higher CASA like SBI, PNB, Dena, Axis). Hence, in short term, one can expect margins to remain under pressure, to be offset later by larger volumes.

Outlook
If interest rates remain soft, one can expect home loans may witness a come back