ICICI Bank [Get Quote], the country's second largest lender, has raised its home loan rates by 1 per cent for new borrowers.

The bank raised it floating rates from 12 per cent to 13 per cent, with the fixed rate being raised to 16.5 per cent from October 10.

Despite the slew measures taken by the central bank to ease the liquidity condition, the private lender has hiked its home loan rates in response to high cost of funds.

The bank's home loan rates, which are now among the highest in the industry, have been raised without any public announcement. The bank said it has sent letters to the loan applicants, detailing the new rate structure.

The interest rate on ICICI Bank home loans is linked to the ICICI Bank floating reference rate (FRR) or prime lending rate (PLR). As per earlier communication, the bank's FRR had gone up from 13.50 per cent to 14.25 per cent, while the PLR had gone up from 15.50 per cent to 16.25 per cent, effective from July 31, 2008.

The bank said that the new home loan rates are not applicable for the bank's existing customers.

The central bank has reduced the cash reserve ratio by 250 bps to 6.50 per cent, effective from October 11, and further slashed the repo rate by 100 bps to 8 per cent. A cut in repo rate reduces the cost of funds for banks, which is the main yardstick to decide on lending rates.

HDFC [Get Quote] offers floating rates of 11.25 per cent for home loans below Rs 30 lakh (Rs 3 million), and 11.75 per cent for loans above Rs 30 lakh. The fixed rate for HDFC home loans is currently 14 per cent.