REAL ESTATE NEWS
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This Monsoon, Get The Best Bargains In Home Loans
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The 30 something saree clad Lalitaji who came in a TV ad is a household name that many would remember. In the 80s, she inspired many household women to squeeze the best value for their money. Big bazaars and the Subhikshas are the new hope. After all, the prices of TVs, vegetables, mobile phones today are willing to drop, if asked for. Should home loan rates be left behind?
The goods news is that interest rates of home loans are available for bargain – unofficially though. Banks and housing finance companies (HFCs) are willing to bend and lower interest rates if you are ready for hard negotiation. Already they are charging differential rates for new and old floating rate customers.
Take for instance, the “Monsoon Hungama” offer of HDFC for its new customers. According to the offer, only new customers would get 0.25 percent discount on home loans. Old customers, however, do not have any benefit from this offer. They will continue to pay 11.25 percent p.a. on floating home loans even as new customers got a tad better deal at 11 percent.
Home loans rates typically follow the interest rates of the economy. So, if say the benchmark interest rates (say 10 year government bond yield) move up, home loan rates follow suit and vice versa. But in the past one year, the banks got pragmatic. While they increased the rate for new customers, they didn’t raise the rates as much for the existing customers fearing default.
Industry experts say that typically with every 0.25 percent increase in cost of funds, a bank increases the interest rates by 0.5 percent. However, the bank lowers the rate by around 0.25 percent only if the cost of funds falls by 0.5-0.6 percent
As a retired banker explains, “The last 1 percent hike in home loan rates could have been avoided by the banks/HFCs. Even now the banks/HFCs can lower the rates at least by 0.25 percent. But they are waiting and watching the market.”
He added that banks may look at lowering the rates, by 0.25-0.5 percent, in the festive season. That’s the time typically customers look at fresh investments in real estate. The monsoon is the lull period.
Source: The Economic Times (Delhi edition), Vidyalaxmi, July 16, 2007
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