Mumbai: Taking the home loan market by surprise, Union Bank of India (UBI) today (Dec 22, 2003) hiked interest rates for fresh housing loans by 0.50 per cent even as banks and housing finance companies maintained that rates would remain stable for the time being.

While banks and housing finance officials concurred with Union Bank's CMD V Leeladhar's view that rates have bottomed out, they did not see any immediate stimulus for hiking rates especially when the system is flush with liquidity.

Ruling out hike in home loan rates, ICICI Bank chief operating officer R Sabarwal said, "Any revision will have to take into account cost of finance and operation and risks exposure."

LIC Housing Finance Ltd chief executive S C Jain said, "We are not thinking of hiking rate as of now".

Giving the rationale for revising the rates, Leeladhar said, "The rates on housing loans have bottomed out and should be a remunerative business. We also need to check any prospect for delinquency like defaults on payment."

Analysts said Union Bank was not a significant player in the home loan market and its impact on rate trends would be minimal. But issue of delinquency was crucial as any laxity could turn loan into a non-performing asset, they added.

RBI Deputy Governor Vepa Kamesam at a recent Bank Economists Conference referred to the delinquency rate, and said it was not a concern at present, but if banks continue to grow assets by cutting corners, they will have higher non-performing assets.