Tag: loan rates

EMI relief for home loan takers in the offing

19 Mar 2013, ET Bureau.

MUMBAI: Home Loan borrowers hoping for lower interest rates may have to wait a little longer. Banks are not likely to pass on the benefits of RBI’s repo rate cut to borrowers this month.

“There is no reason to believe that easing will happen at a rapid pace but it may happen at a measured pace. We expect easing of deposit rates as we enter new fiscal year, and as this happens, the transmission will take place,” said SS Mundra, chairman and managing director, Bank of Baroda.

However, borrowers need not despair. While interest rates are unlikely to be reduced immediately, they can expect relief in the coming weeks. “Since the deposit growth has been muted, interest rates on deposits too have remained high. Therefore, we expect the monetary transmission to take place only after two to three months,” added B A Prabhakar, chairman and managing director, Andhra Bank.

And when banks do cut rates, you will have two options to choose from – reducing your EMIs or the loan tenure. “In such cases, it might be tempting to get your EMI lowered, but refrain from doing so. Getting the tenure shortened should be your priority so that you clear your dues sooner,” says certified financial planner Pankaj Mathpal, CEO, Optima Money Managers. Remember, shorter tenure would mean lower interest burden on your loan.

Home loans will grow 20% on rate cuts: National Housing Bank

24 Oct 2012, ET Bureau.

MUMBAI: Housing finance regulator National Housing Bank expects a growth of 20% in loans this fiscal, up from 17% in 2011-12, with lenders slashing rates and reducing other charges. Mortgage lending business has become competitive with state-run banks aggressively cutting rates and waiving processing fees, besides doing away with the pre-payment penalty, making it easier for borrowers to switch lenders.

“Some banks are very aggressive in terms of lowering of interest rates,” said NHB chairman and managing director RV Verma. “The lowering of base rates and abolition of some of the fees have made the whole environment competitive and, going forward, we do not rule out further price wars among the banks and HFCs (housing finance companies),” Verma said.

Banks have the benefit of lower cost of funds through strong deposit franchise, while HFCs are constrained by higher cost of funds as they borrow from banks and other sources. Verma, however, said the HFCs can succeed by offering personalised service.

“Despite the slowdown in other sectors of the economy, all geographical locations for that matter, the demand for housing loans has been good and sustained, and we are seeing growth of close to 20% this year for 2012-13 as compared with last year’s 17% between banks and HFCs,” he said. NHB plans to disburse close to Rs 17,000 crore as refinance support to banks and housing finance institutions in 2012-13 against Rs 14,400 crore in 2011-12.

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