Mumbai, Aug. 11: Bank of Baroda (BoB) today brought down lending rates on housing and car loans. The cost of home loans has been cut by 25-50 basis points, while car loans are cheaper by at least 75 basis points.

The bank has decided to cut lending rates at a time when interest rates are looking up. BoB said the rate reductions have been done to achieve a large share of incremental credit before the festival season.

The public sector bank, which has aggressive plans on retail loans, hopes to achieve 60 per cent growth over the previous year in this segment.

These changes will apply only to new loans with effect from August 1 and for existing loans with a floating rate option.

BoB said in the case of housing finance to individuals, the drop in the rate varies from 0.25 per cent under floating rate to 0.50 per cent under the fixed rate option for five years and above.

Floating rate housing loans between 5-15 years will now cost 8.25 per cent; loans above 15 years will attract a 8.50 per cent rate.

Under the fixed rate option, the interest rate stands at 9.25 per cent between 5-10 years and 9.50 per cent for those above 10 years.

Consumers interested in car finance have a reason to cheer, too. In its bid to make a mark in this segment, dominated by majors like ICICI Bank, BoB has cut rates by a significant 0.75 to 1.25 per cent for loans extended up to 3 years.

For loans up to three years, an amount of Rs 5 lakh will be disbursed at an interest rate of 8.50 per cent, while loans of over Rs 5 lakh in the metro areas will involve an interest rate of 8 per cent. For semi-urban/rural areas, these interest rates stand at 8.50 per cent, respectively.

BoB has also brought down interest rates on loans to traders. The rate is now 10.50-11 per cent.

Bank watchers see it as a one-off development and feel it is unlikely to be replicated others.

It comes at a time when inflationary expectations are building up given the rise in global crude prices.