The interest rates on home loans have seen many drastic changes, in the recent years. The rates were at the normal pace, until the global economic crisis started to hit the housing finance sectors. During the crisis period, the rates were kept at lower rates to attract customers, but the biggest challenge was to boost the buying power; many ended up in delaying the EMI payment and in many cases, the banks were in a position to restore back the acquisition lands/apartments, due to lack of job opportunities; great financial imbalances, etc… Many banks stopped the entire credit card processing and the rates at which the home loans rendered were reduced considerably to great level. But, the fact that India didn’t suffer the worst scenarios in terms of economic balance, when compared with other countries, is really soothing. It is getting restored back to the normal economic balance at a very fast pace; this has demanded higher interest rates on loans, as there is a huge pressure in the input to the banks.
Recently, the Reserve Bank of India (RBI) has hiked the interest rates of auto and home loans; according to which the small time lending rates would be increased to 0.25% and the borrowing rate would be increased to 0.50%. This new regulation have become a nightmare to the customers, especially to the new buyers who are now ready to invest in real estate, but are bewildered, because of the rapid changes of the interest rates on home loans. The leading banks are now rushing up their reviews on the rates at which they could increase the interest rates, basic lending rates, etc.; for example, the SBI, which tops the list of housing finance banking sectors with its attractive housing loan schemes, is now discussing regarding the increase in the interest rates; ICICI has decided to review its basic lending rates; HDFC is planning for a new scheme, but as such didn’t mention about the drastic changes in its policies.
There are two types of home loan interest rates in India, such as fixed rate and floating rate. The fixed rate consists of a constant amount, as interest rates throughout the entire loan payback period, but the floating rate keeps changing the interest rates according to the changes in the standard benchmark of the housing finance sectors. For example, the SBI provides a fixed interest rate of around 8% for a loan amount of 50 lakhs, but being fixed means, the interest rate would be 8% per annum for the first year and for the 2nd and 3rd years, it would be around 9% per annum and the floating rate scheme of SBI, also provides the same interest rate, but basic rate at which the loan is rendered would be different. Thus, each bank has its own policies and procedures for fixed and floating rate interest rates. But, majority of the banks are rendering home loans at interest rates starting from 8% and reaching till 9.75% on an average. No one can ever be sure about the interest rates, as they are subjected to dynamic changes, every now and then!