In the past few months the Indian home loan market has seen highly varied changes, home loan rates went all the way up to 14 percent, however due to the market downturn the government of India is taking steps to bring home loans closer to the common man.Perhaps this is the only bonus for the middle class man in the past few years, when the property prices and home loan rates shot up and the middle class man could not afford to buy a property.
The GOI has announced a special package for loans up to Rs 5 lakh where the banks reduced the rate to 8 per cent. Loans up to Rs 20 lakh will be charged 9.25 per cent. These rates could be fixed for five years. Also, there will be no processing fees and free insurance on these loans. But these loans are being provided only by the public sector banks.
Thanks to the NHB housing loans are expected to get cheaper as Housing finance companies will get access to cheaper funds with the National Housing Bank providing the special refinance fund from the Reserve Bank at 8 per cent interest rate, smaller housing finance companies join the ranks of major banks and housing finance companies to give loans below Rs20 lakh at attractive interest rates.
The NHB is even looking at the possibility of restructuring reverse mortgage scheme to senior citizens in association with insurance companies like the Life insurance Corporation of India.
However, for loans above Rs 20 lakh, there has been no respite yet, but more rate cuts are expected. With the consistent fall in the inflation numbers RBI is expected to cut rates. In turn, you could expect banks to cut housing loan rates.
In the short to medium term home loan rates are expected to fall, which means it is a good time to buy a home especially if it is not just an investment but a home for personal use.
As the expectation is high on fall of interest rates, home loans would be wiser to be taken on floating interest rate rather than fixed interest rate. at a future point of time you can consider converting to fixed interest rate when interest rates stabilize.
The effects of the economy are such that banks have made due diligence before disbursal very strict, and the margins to be provided by customers are higher now. The present scenario suggests that saving money is better than spending money, save and invest for a brighter future!
