Tagged: Interest Rates

NTH :: SBI reduces home loan rates by up to 25 bps

By Saloni Shukla, Sangita Mehta | ET Bureau|Updated: May 08, 2017, 03.38 PM IST | Economic Times


MUMBAI: Country’s largest bank, State Bank of India has reduced home loan rates between 10 to 25 basis points, a move that will force other lenders to reduce rates. SBI has refrained from cutting its marginal cost of lending rate (MCLR) which stands at 8% for one year. SBI has the largest share on the home loan market.

The bank will now charge salaried borrowers 8.35% on home loans upto Rs 30 lakhs as against 8.60% For loan above Rs 30 lakhs bank will charge 8.50%, down by 10 bps. The bank will continue to charge 8.60% on loans above Rs 75 lakhs. The rate cut will help only the new borrowers since the existing borrowers are locked into one year fixed rate on interest as per the rule of arriving at lending rates.

The reduction in rates comes within a month of five associate banks merging with the parent bank. Recently SBI cut deposit rates sharply by 50 basis points across different maturities.

SBI has also said that an eligible home loan customer can also avail of an interest subsidy of Rs. 2.67 lacs under the Pradhan Mantri Awas Yojana scheme. SBI said that to supplement the affordable housing push, SBI has also come out with special offerings for construction finance to the builders for affordable housing projects. “This will give a dual push both for construction finance and also for home finance for affordable homes.”

Mr Rajnish Kumar, managing director, SBI said, “We have seen a steep hike in the home loan enquiries recently and reduction in rates will further help millions of home buyers fulfill their dream of owning a home. Individuals can apply for home Loans through multiple channels.”

Source: https://goo.gl/ReoG9P

ATM :: Make lenders reduce your home loan rate

Interest rates on home loans have come down. But how easy, or difficult, is it to take advantage of these cuts? We spoke to some people who tried to reduce their EMIs
Ashwini Kumar Sharma, Vivina Vishwanathan | Last Modified: Tue, Mar 28 2017. 09 38 AM IST | Livemint.com


Early this year, banks and housing finance companies reduced interest rates on home loans. The falling rates encouraged Dr Amrendra Kumar, 34, hair transplant specialist and director of DermaClinix, a Delhi-based skin and hair care clinic, to approach his lender HDFC Ltd to revise the interest on his outstanding home loan of Rs80 lakh. His colleagues Dr Kavish Chouhan (who had a Rs60 lakh loan from HDFC) and Dr Jyoti Gupta (who had a Rs.30 lakh loan from Deutsche Bank) too approached their lenders. They were paying interest rates in the range of 9.45% and 9.55%.

As the loan amount was high, lower interest rates would mean a lot of savings for all of them.

They approached their lenders to revise the rates but did not get a positive response and decided to approach other lenders. They took help from a direct selling agent (a loan distributor), who offered to transfer their loans to Axis Bank Ltd, where they would have to pay 8.5% per annum. All of them decided to transfer the loans. While they were arranging the documents, the agent told them that Axis Bank can offer 8.35%, which could even go down to 8.15%, but they would have to get the documents quickly for that.

When Gupta approached Deutsche Bank, it gave her the required loan and foreclosure documents in a few days. But when Kumar and Chouhan went to HDFC, they were told to wait for up to 15 days. Due to delay in getting the documents, they could not avail the special offer but they wanted to transfer their loans to Axis Bank, as it was offering 8.5%, without any processing fee.

Deutsche Bank did not make any counter-offer but HDFC did. It first offered to reduce the rate to 8.95%, with a one-time fee of Rs5,750; and than to 8.7%. But, when the doctors insisted on moving, it agreed to match the Axis Bank rate, with a fee of Rs575. An Axis Bank spokesperson said: “Customers are offered lower home loan interest rates on the basis of their credit profile. Credit score and credit history are important parameters in the credit appraisal process.”

Based on the their experience, it seems that there is stiff competition among lenders. Therefore, borrowers should negotiate well before deciding to transfer home loans.

Things to know

Offerings: Led by State Bank of India (SBI), which cut up to 90 basis point from its lending rates, other banks too cut their rates. Housing finance companies too reduced their lending rates. For instance, HDFC Ltd reduced its home loan rates from 9.10-9.15% to 8.65-8.75%. One basis point is one-hundredth of a percentage point.

Charges: Shop around and know the charges and fees that you may have to pay for transferring a loan. According to an HDFC spokesperson, there is no selective process for doing so and old customers can move to new rates by paying a small conversion fee.

Beside lenders’ websites, agents and loan aggregator websites can also be used to compare interest rates and charges. Typically, stamp and administration charges are in the range of Rs1,000 and Rs1,500. As mentioned above, many lenders offer “nil” processing charges too. Make sure to ask if the lender wants you to buy property insurance.

Documents: You will need to have the documents in place. “The documentation required for balance transfer and purchase of a new home include proof of identity, proof of residence, latest 3 months salary slip (for salaried customers), tax returns for the last 2 years (for self-employed customers) and last 6 months’ bank statements. Home loan sanction turnaround time is 3-5 working days,” said the Axis Bank spokesperson.

“The same set of documents are required that would be needed for any new home loan. As the customer is moving from another bank to HDFC, we would need a list of documents in possession of the customer’s existing bank. We would also need the outstanding loan amount from the customer’s bank,” said an HDFC spokesperson.

Remember to arrange your Know Your Customer (KYC) documents such as identity and address proofs. Proofs of income can include Form 16, income tax return and salary slips along with bank statements, and the complete chain of property titles along with registration deed.

Duration: “If the customer has taken a loan for a project that we have already approved, then the processing time will be much faster. The duration for disbursement also depends on the documents customer provides,” said M.G. Vaijinath, chief general manager-real estate and housing department, State Bank of India. Also, it depends on the bank you are dealing with.

While transferring a home loan to lender who charges a lower interest is financially beneficial, the process is not easy. “We had to make several requests via emails and on phone, and about 4-5 visits to HDFC. At last, we had to settle with HDFC, forgoing the 0.10% lower interest that Axis Bank was offering, as it was taking too much time,” said Chouhan. A loan transfer usually takes 2 weeks, but in some cases it can take more than that, as was the case above.

Ideally you should first approach your existing lender, and check if it is ready to reduce the interest rate. Also enquire about the charges. Ask for some fees to be waived. Simultaneously, approach other lenders and use your credit score to bargain. Compare offers of your existing lender with new lenders’ carefully. Do your math and only if the long-term benefits are substantial, decide to transfer your home loan.

Source: https://goo.gl/0ZCtM5

NTH :: SBI cuts base rate by 0.15% to 9.10%; your car, home loan EMIs set to decline

Business PTI | Apr, 03 2017 18:53:46 IST | Firtspost.com


New Delhi – Ahead of the RBI monetary policy this week, the country’s largest bank SBI has reduced benchmark lending rate by 0.15 percent to 9.10 percent, a move that will lower EMIs for borrowers.

Base rate or the minimum lending rate of the bank has been reduced from 9.25 percent to 9.10 percent effective April 1. The bank has also reduced its base rate by 0.05 percent to 9.25 percent.

Similarly, benchmark prime lending rate (BPLR) has also been reduced by similar percentage points to 13.85 percent from 14 percent.

With the reduction, EMIs for the new as well as existing borrowers who have taken housing and car loans at base rate will come down by at least 0.15 percent.

The new rate is effective from the date the bank merged five of its associates and Bharatiya Mahila Bank putting it on the list of top 50 large banks of the world.

The total customer base of the bank has reached 37 crore with a branch network of around 24,000 and nearly 59,000 ATMs across the country.

The merged entity has a deposit base of more than Rs 26 lakh crore and advances of Rs 18.50 lakh crore. It is to be noted that the SBI has made changes in signage and logo, with its iconic keyhole set against the background of inky blue.

There have been minor changes in the design and colour of SBI’s new look from April 1.

The background to the SBI signboard has been changed from white to inky blue while the SBI logo or the monogram is a few shades lighter than the existing blue.

Source: https://goo.gl/JSytJz

ATM :: Still paying interest on home loan at old rates? Cut EMI by switching to MCLR-linked rate now

By Narendra Nathan, ET Bureau| Mar 20, 2017, 04.06 PM IST | Economic Times


Just like bank depositors, those borrowing from banks also need to be alert in order to protect themselves against unnecessary charges. Given below are the most common areas where banks tend to overcharge customers.

If you compare the interest costs of your friends and relatives on bank loans—housing, auto, personal loan, etc.—you will realise that they vary drastically. And these costs not only vary across banks, but across customers of the same bank—and not because of varying customer credit scores. Some banks have been offering loans at cheaper rates to new customers, while charging old customers a higher rate. “Banks continue to follow the discriminatory practice of offering differential rates for existing and new customers and this should stop,” says Ramganesh Iyer, Co-founder, Fisdom.

As the banking regulator, the Reserve Bank of India (RBI) should stop this discriminatory practice, which it is partly responsible for creating. The RBI introduced the MCLR (marginal cost based lending rate) method, effective April 2016, to enable a faster transmission of rate cuts to bank customers, replacing the base rate method that was being used by banks to set their lending rates—earlier the base rate had replaced the less transparent prime lending rate (PLR). Now, borrowers who took loans 4-5 years back, and did not ask their bank to switch to the newer regime, are still linked to the PLR. Those who borrowed when the base rate became the benchmark are stuck with the base rate. Now, while banks are giving new loans at cheaper rates, based on MCLR, old customers are still paying higher rates.

“Since banks offer different rates, it is better to visit some common aggregator and understand the lowest rates available in the market. This will help you bargain better with your bank,” says Dipak Samanta, CEO, iServeFinancial.

To reduce your interest outgo, you need to shift your loan from base rate or PLR to MCLR. Shifting to MCLR now is a good move, say experts. “Though RBI’s stand is neutral now, rates may not go up from current levels. In fact, they may come down later—after an year,” says Balwant Jain, investment expert. Bear in mind though, in an upward moving interest rate regime, MCLR will move up faster than base rates, just like it falls faster in a reducing interest rate regime.

Still paying interest on home loan at old rates? Cut EMI by switching to MCLR-linked rate now

Loan reset charges
There are two types of loans: Fixed and floating rate. Floating rate loans are supposed to mirror the rise and fall in interest rates set by the RBI. But this rarely happens. While banks increase rates immediately, they are very slow in cutting them. The introduction of new benchmarks has also turned out to banks’ advantage. They charge customers for shifting from one benchmark to another— from PLR regime to base rate regime to MCLR regime now. The charges are levied to meet the expenses involved in drafting and registering new agreements—stamp duty, registration charges, etc. Though these expenses vary across states, ordinarily they won’t be more than 0.2% of the outstanding amount. However, some banks try to profit from this also by charging around 0.5%.

Should you go for a reset even if it involves a small charge? Yes. The amount you save will be significantly higher over the years. To illustrate, consider the case of a home loan borrower with Rs 50 lakh outstanding loan amount and a 15-year tenure. A 1% fall in interest— from 9.5% to 8.5%—will bring his EMI from down from Rs 52,200 to Rs 49,250, a reduction of Rs 2,950 per month. A total saving of Rs 5.31 lakh—significantly higher than the reset fee of Rs 25,000 even at the maximum rate of 0.5%. You may be able to get this reset cost down by negotiating with your bank. A threat of shifting to another bank often works. “Another way is to approach the branch manager. Based on the value of your relationship, they can reduce or even waive charges,” says Samanta. The ‘value of relationship’ here is crucial. If you have multiple relationships with the bank—savings bank account, credit card, other loans, investment, etc.—you have a valuable relationship and will receive a favourable treatment.

Source : https://goo.gl/FBRCpI

ATM :: What does a reset clause in a home loan agreement mean?

While availing a loan from a bank – whether it’s a floating or a fixed rate loan — one should get all the relevant details cleared from the bank. Along with the loan application form, banks are also required to provide full information about the interest rates applicable during the tenor of the loan.
By: Navneet Dubey | Published: March 20, 2017 5:20 PM | The Financial Express


While availing a loan from a bank – whether it’s a floating or a fixed rate loan — one should get all the relevant details cleared from the bank. Along with the loan application form, banks are also required to provide full information about the interest rates applicable during the tenor of the loan.

The bank should also inform the borrower about the fees and charges payable for processing (whether a floating or fixed rate loan), penalty rate of interest for delayed payments, conversion charges for switching loans from floating to fixed rates, existence of any interest reset clause, time by which a decision on the application will be conveyed to the applicant and any other matters which will affect the interest of a borrower.

“Home loan reset clause refers to the particular clause in your home loan agreement stating the period after which your fixed rate home loan will get converted to a floating rate loan,” says Naveen Kukreja – CEO & Co-founder, Paisabazzar.com

How does a reset clause apply?
An interest rate reset clause simply means that when applied, it allows a bank to review the rates and reset them at the end of a specified period of time – based on the interest rates prevailing at that time.

“The reset clause applies to home loan borrowers opting for mixed rate home loans. Under the mixed rate system, your interest rates will remain fixed for a teaser period, usually for the first 2–4 years of your tenure, after which your loan gets converted to a floating rate regime. Remember that the fixed rate levied during the teaser period will be 10–20 bps higher than the floating rates prevalent at the time of the loan sanction. Similarly, borrowers should be prepared for regular increase or decrease in their EMIs during the post teaser period, depending on the prevalent interest rates,” says Kukreja.

Even your floating rate charged during the post-teaser period might be different from a borrower opting for floating rate loan with the same date of loan sanction. Borrowers should carefully go through the charges and rates of mixed rate home loans and compare them with the floating rate loans before deciding the type of interest rate,” he says.

One should also know the following aspects before opting for a floating interest rate:

  • The base rate mentioned by the bank to which the floating rate of interest is associated with.
  • The agreement clauses which specify a minimum interest rate clause.
  • The reset dates mentioned by the banks, if any, like January 1, April 1, July 1, etc.
  • Whether the margin can be changed during the tenure specified in the loan or not.

Source : https://goo.gl/GEP3ye

ATM :: As home loan train gets overcrowded, HFCs stare at margin squeeze

Banks have aggressively cut their home loan rates and once they begin fixing their bad loans, rates will drop further. Incremental business growth too could get slower as banks garner market share
Aparna Iyer | Last Modified: Wed, Mar 22 2017. 08 28 AM IST | LiveMint.com


Housing finance companies (HFCs) have had the best run over the last one year with their valuations soaring, especially after the government’s demonetisation exercise. The fact that in the wake of falling corporate loans, retail-focused lenders and HFCs in particular have the healthiest businesses has contributed a lot to these valuation increases.

Default rates in home loans are much lower than in corporate loans and the lowest among various retail loan segments. Notwithstanding the impact of the currency withdrawal on the real estate sector, home loan repayments haven’t been derailed while all other loans have succumbed to rising defaults. For instance, Housing Development Finance Corp. Ltd’s (HDFC’s) bad loan ratio was 0.81% as of December while that of Dewan Housing Finance Corp. Ltd (DHFL) was 0.95%. Bad loan ratios of banks are massive compared to these, courtesy their corporate loan book.

But the valuation of a business has a lot to do with future earnings and this is where the going will get tougher for HFCs.

Here is a line of caution that investors should focus on. The home loan market is getting extremely crowded, with most banks aggressively expanding their portfolio. The largest home loan lender is still a bank, State Bank of India (SBI), and it has been aggressive in the market for the past five years. SBI’s home loan book has grown at a 16% capital adjusted growth rate during the said period despite the large size, while its market share has remained at 15%.

But SBI is an old player and the new lenders who had jumped on the home loan bandwagon are all banks that were struck by rising corporate bad loans and shrinking credit growth. Bank of India, Bank of Baroda, Axis Bank Ltd, Kotak Mahindra Bank Ltd and others have laid out plans to expand mortgage loans. Further, predominantly corporate lenders, who had reduced their exposure to the home loan market, are now making a second entry.

The ensuing competition will begin to squeeze margins and this has already begun. Banks have aggressively cut their lending rates and once they begin fixing their bad loans, rates will drop further. SBI’s home loan rate has dropped 100 basis points (A basis point is one-hundredth of a percentage point) in the last one year and both SBI and HDFC currently give home loans at 8.5%. HFCs such as DHFL, CanFin Homes Ltd and Repco Home Finance Ltd lend at slightly higher interest rates.

Analysts at Kotak Securities Ltd note that spreads and margins for HFCs will narrow as the decline in their cost of funds too will be limited.

Incremental business growth too could get slower as banks garner market share. Axis Bank’s market share has risen by 60 basis points in the past two years while that of Kotak Mahindra Bank has grown by 50 basis points.

HFCs’ rich valuations are sure worth a second look.

Source: https://goo.gl/DAZC1f

ATM :: Are you aware of the home loan benefits women enjoy in India?

Searching a dream home remains very much in the mind of the people as it gives them the assurance of their stay for lifetime. The same assurance is not possible with a rented accommodation.
By Rishi Mehra | Published: March 9, 2017 2:39 PM | The Financial Express


Searching a dream home remains very much in the mind of the people as it gives them the assurance of their stay for lifetime. The same assurance is not possible with a rented accommodation.

In the pursuit of your dream home, you invariably rely on a home loan which can be availed for as long as 20-30 years. Since the home loan tenure is so long, the eventual loan cost from the customer end can be very high. But that can reduce in the case of a woman borrower. So, stay tuned as we take through the benefits that women borrowers can enjoy in the case of a home loan.

Lower Interest Rate
The interest rate holds the key to a cost-friendly home loan journey. Home loans are invariably in large amounts for a longer duration. So, if the interest rate is on the higher side, your pocket can get pinched. A slight difference in the interest rate can reduce the flow of interest outgo substantially in a period of 20-30 years. In addition, the monthly installment will also come down. A women borrower enjoys a concession of 0.05% in the interest rate from most banks in India. Let’s see the interest rate offered to women borrowers by several lenders in India.

Interest Rate Offers of Different Lenders (Suppose Loan Amount is Rs 50 lakh and Tenure Equals to 20 years)

From the table, you can see a saving of around 38,000 for women borrowers over male applicants.

Reduction in Stamp Duty
Stamp duty does form the part of the property cost. And a difference of a few percentage can make a huge difference in your home ownership cost. The lenders finance a home loan at about 80%-90% of the property cost. As far as stamp duty goes, it differs from one state to another. Particularly, when women buy a property, the stamp duty generally remains lower. A concession of 1%-2% is generally applicable. So, on a property worth Rs 60 lakh, a woman borrower can save around Rs 60,000-1,20,000.

Tax Benefits
Like the male counterparts, women borrowers can also be eligible for a tax deduction on the home loan repayments. The maximum tax deduction allowed in the principal and interest repayments is Rs1.5 lakh and Rs2 lakh, respectively. Women borrowers applying for a home loan along with their husbands can receive the tax deduction in an equal proportion.

These are some of the benefits that women borrowers enjoy in the case of a home loan. But choose a lender that can offer you a loan at a much lower interest rate than its competitors.
(The author is Founder and CEO, Wishfin)

Source: https://goo.gl/7ileQz