Bangladesh House Building Finance Corporation (BHBFC) is planning to bring down the interest rate on home loans to a single digit following the government's decision to lower the lending rate to 9 percent.
The board of the state-run lender decided to bring down the interest rate recently and has sent a proposal to the finance ministry for the final nod.
The move came at a time when most banks are charging 12 percent to 13 percent for home loans.
“We have decided to cut the interest rate on home loans to 9 percent as the government has instructed banks to bring down the lending rate to a single digit by August,” said Debasish Chakrabarty, managing director of the BHBFC.
The new rate will come into effect after the finance ministry gives the approval, he said.
The interest rate on house loan of the BHBFC was higher than those of banks even a year ago. The situation reversed as private banks are facing a fund shortage because of their aggressive lending.
Private commercial banks lent house loans at between 8.5 percent and 9 percent at the beginning of 2017 when the rate of the BHBFC was 12 percent.
The BHBFC reduced the maximum interest rate to 10 percent in July last year to adjust to the market rate. It was 9.5 percent for the clients who live outside of the city.
Private banks, however, could not continue their low interest rate long as the liquidity crisis pushed the home loan rate up to 12 percent in February this year.
The sudden hike of the interest rate from 9 percent to 12 percent put flat owners in trouble as their installment size increased significantly.
The proposed 9 percent interest rate on home loans will be effective from July 1, said a senior executive of the BHBFC.
Clients who took loans before July will not be entitled for the new rate. Only the loans that were approved since July 1 will get the single-digit rate, according to the corporation.
The corporation will focus on loan recovery and increasing new investment to offset the loss from the cut in the lending rate, the senior executive said.
Currently, the BHBFC has 31,000 clients. The corporation approved loans of Tk 401 crore in 2017-18 against a target of Tk 400 crore. It disbursed Tk 362 crore last fiscal year.
The BHBFC is the only state-run organisation that gives house financing and gives up to 70 percent of a flat's value in loans.