Home Loan Interest Rates to Fall Down

April 11, 2007	(2 votes, average: 4 out of 5)  Loading ...
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The situation of perplexity created by increasing home loan rates seem to be over soon as bankers expect the rates to witness a fall of 15% after two years of robust 33-35% surge and sharply below the expected overall credit growth of 22-24%.

The policy measures proposed by the RBI can be taken as a red signal for bankers to exercise caution on the real estate sector, including home loans.

Around 18% of the hike in banks’ non food credit in 2006-07 was because of the home loans and another 5% on account of loans given to the commercial real estate. In 2005-06, home loans accounted for 12 per cent of the total loans.

Banks have become too conscious in offering the home loans now. Some banks have brought a correction in their loan-to-value (LTV) ratio. Till now, borrowers could get the loans up to 90-95% of the purchase price of a residential property. Now, they have altered the ratio to 80%, thereby bringing back the norm which was prevalent over three years ago.

Thus, individuals who were earlier enjoying the eligibility to borrow a Rs 20 lakh loan will now be able to borrow Rs 17 lakh.  Most banks have held rates for existing borrowers but raised the rate for new.

The interest rate surge in home loan has forced the consumers to break their bank and come up with the money to pay prohibitive EMIs every month. For every 100 basis point increase in the rate on home loans knocks off nearly Rs. 1 lakh from the amount an individual is eligible to borrow.

News Published Under:   Home Loans |

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