Mumbai: Expecting a rise in long term rates, Housing Development Finance Corporation Ltd (HDFC) has hiked its interest for fixed rate products while leaving the floating and retail prime lending rate unchanged.

The fixed rate loans are now being offered in a band of 7.75 to 8.50 per cent per annum based on the credit quality and loan product. This band was 7.5 to 8.5 per cent earlier, HDFC said in a release in Mumbai today (August 3, 2004) and added that the revised rates were effective July 26.

"We are offering two options at differential rates, one where HDFC has a right to increase rates but only in the event of extreme volatility in the money market conditions and the other at a slightly higher rate where the rate is fixed for the entire term," it said.

Explaining the rationale, the housing major said, "During last month or so, interest rates in the economy have been showing signs of hardening and the inflation figures released last week also point in the same direction. Though we believe the rates will remain soft in the short term, the long-term view is that the rates are likely to rise. This is reflected in the 10-year Government security rates, which are quoting at over 6 per cent."

HDFC was in the business of long-term housing loans and when the company lends at fixed rates for periods as long as 15 to 20 years it needs to keep in mind the long-term outlook on rates in order to avoid any possible mismatch, it added.

ICICI Bank spokesperson said their rates on home loans remain unchanged.