Critical Crisis for Floating Home Loan Borrowers

April 19, 2007	(1 votes, average: 4 out of 5)  Loading ...
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Home loan borrowers are undergoing a tough situation these days after the latest increase interest rates. The reason is that nearly 90% of the borrowers have availed the loans on floating rate basis which is subject to change according to interest rate movements.

Most home loan borrowers opt for floating interest rates, a fact that is already accepted by major banks including Housing Development Finance Corporation (HDFC), ICICI, State Bank of India (SBI).

Every 0.25 percentage point increase in home loan rates gives a way to higher equated monthly installment (EMI) of around Rs. 16 per one lakh for a 20 year loan. Similarly, the home loan borrower requires paying Rs. 15 per one lakh for a 15 year loan, Rs 14 per lakh for a 10 year loan and Rs.13 per lakh for a 5 year loan.

Every bank is following different criterion regarding a hike in home loan interest rates.  Talking about HDFC, it has raised its lending rate by 0.75 percentage point for new customers and 0.50 percentage point for old customers. This is however the fourth successive rate hike since May 2006 for HDFC customers who have bought the loan with a floating rate. The bank is now charging 11.25% floating rate and 13.25% fixed rate for new customers. HDFC does not foresee any further rise in interest rate in near future.

ICICI has added to its home loan interest rates by one percentage point to 14% for fixed rate loans and to 12% for floating rate loans. Contrary to this, SBI denies the possibility of bringing any change in the interest rate for its existing home loan borrowers.

News Published Under:   Home Loans |