Cheaper Home Loans Coming Soon

Good news for home loan borrowers. Those who are planning for buying a home loan should wait a little longer to take the interest rate benefit. A reduction is expected in the auto loan, housing loan and other corporate loan rates; the Reserve Bank of India yesterday announced a slash in its benchmark policy rates or Repo rates by 25 basis points, lowering it down to 7.5 %.

The cash reserve ratio (CRR) is same as before is 4 per cent. The Repo rate is defined as the interest rate at which RBI lend funds to the different Indian banks. If RBI reduces the Repo rate, it directs the banks to lower rates for customers on all product loans. So a change is expected.

The Governor of Reserve Bank, had slashed the lending rate for short term by 0.25 % to 7.50 %, making the second cut this year.

The central bank has kept in mind a rigid monetary policy maintaining sticky inflation, but the latest ease of stand has been encouraged by the announcement in softening and growth of inflation.

The banks are not going to pass the benefit of RBI’s cut in Repo rate during this month. So it is best for home loan borrowers to wait a little more time until the banks announce the cut in Home Loan Interest rates or other product rates. The Managing Director and Chairman of Bank of Baroda, Mr. S S Mudra, announced yesterday, "There is a few chance to believe that reduction will happen at a measured speed. We are expecting ease of deposit rates as we enter new financial year, and this happens the transmission will take place".

However, consumers need not be depressed because the rate cut will be offered, but the change will not be immediate. Borrowers can expect the interest rate slash in the coming month. The Chairman and Managing Director of Andhra Bank, Mr. B A Prabhakar added, "As the deposit growth has been muted, deposit interest rates to have remained same. Therefore, it is expected the monetary transmission to take place only after two to three months".

 When the different banks reduce the rates for different products like auto loans, home loans, other corporate loans, the equated monthly installments would be low or the tenure would be shortened. This effort of RBI will reduce the burden of loans. It is a relief for all loan borrowers who need loans in the coming quarters.

Prepayment penalty to be charged on fixed interest rate dues

While applying for a home loan, a person first thinks of the interest rates to be paid. He/she either opts for fixed rate or for floating interest rates in which the rates changed according to market fluctuations. Housing loan borrowers who have chosen for fixed rates might have trouble free terms on their finance as the Reserve Bank of India has recommended banks to modify the penalty arrangement on prepayments and charge only on the remaining amount. It also revised that lending institutions must focus on raising long lasting deposits to finance more longer-term loans to assist and decrease the EMI burden on housing loan buyers.

A statement on the possibility of bringing in more long lasting fixed rate loan products by financial institutions such as HDFC Home Loan and others from the banking controller has revealed that banks must accuse prepayment penalty just on the remaining finance amount and not on the value of loan that is normally done. The principle would help customers to save considerable amounts if they were to prepay a loan of fixed interest rate. This approach after the Reserve Bank of India recently authorized to the lender to perform with a prepayment penalty on floating type of housing loans.

The RBI board that organized the statement has also given advice to banks to let famous the long lasting deposits to expand long-term fixed interest rate products. The team observed that the Indian Financial system has government bonds for nearly up to 30 years. This generates a benchmark to matter and cost 30 year bonds by lenders. Financial institutions of India like Axis Bank Home Loan, consequently, make an effort to propose loan-term products of loan, like up to thirty years, that would help to minimize the repayment amount of customers. Fixed-rate long term loan product with cyclic interest rearranges condition say for every 7 to 10 years might offered by banks in addition to plain vanilla fixed interest rate products of loan.

Though, banks must take care that the rearrangement of interest rates may not disobey authorization guidelines on the base rate. Lending institutions might explore the alternative of take-out financing. Adding up, banks may walk around promoting securitization market for improved asset-liability management. The team has also recommended that lenders and India Bank Association must play an important role in educating borrowers regarding probable impact of rate alters on their Equated Monthly Installments (EMI).

Home Loan Interest Rates: Fixed or Floating?

Every individual needs home for shelter. It’s not easy to buy new home in today’s time as the increasing market rates. Before buying any home the person is usually worry about the price of that home or flat. The budget may be sometime going out of the limit and there arrives the problem if you have to pay the instant money. Thus, it makes difficulty when you desire to buy a new home. A person thinks how to fulfill his dreams when this kind of problems arises.

Budget may go out of the limit but what if you have paid that amount in installments?? It’s an easy going process these days. Everybody is buying home and paying the large amount in small EMI’s. A borrower is either salaried or self employed; it became an easy task for him to pay the small installments. Home Loan Interest Rates are the thing which again comes in mind when a customer is planning to pay in EMI’s. The repayment amount must be in budget when a person is paying every month. The real estate market is going down because of increase in price and home loan interest rates. Applying for home loan is the biggest financial step in a person’s life. Depending on the mortgage type a consumer wants to obtain, the interest rates you secure and the length of your house, you can affect total amount pay by the time a person make at the end of loan term.

Whether to choose Fixed or Floating Interest Rates??

·         Floating interest Rates:  If a borrower is applying for fixed rates then you have to pay the EMI’s at the whole tenure period which can be fluctuating depending on the market rates and government policies. If the interest is floating or variable then it may vary up to some limit.  There is various lending institution providing floating rates such as SBI Home Loan Interest Rates providing base rate at 9.70% and the effective rates goes up to 9.95% - 10.10%.

          Fixed Interest Rates:  A customer opting for fixed interest rates have to pay same interest rates at the whole tenure period without any fluctuation of rates. If a person knows his budget and wants to pay accordingly then he may opt for fixed rates.

Before applying for finance many customers may have bad credits or poor credits. But there are various financial institutions who are giving the chance to take loan in poor credits also. The credit may not get counted in their eligibility on loan. The interest rates for these types of applicant may be a bit high but the thing is that a consumer must select the right tender who is giving best deals in the market and it would be better to clear all the criteria about loan before applying including interest rates, EMI’s etc.

Summary: Conclusively, mortgage interest rates are not same for every individual so you should not get worry if your neighbor is getting different rates. Better to look around and shop and depending on your credit score you will get the best lending institution and best deal.