Home Loans breach the 10% Mark.. Where do we go from here ?
Floating interest rates have surged up by three percent and millions of housing loan customers has begun to pay a heavy price. A customer who was paying 7.25 percent for his floating home loans just over a year ago is today forking out as much as 10.25 percent.
There is more bad news from the banking industry. "Interest rates are likely to move up further in tandem with the sharp surge in inflationary spiral. Most banks would be waiting for the signal from the credit policy to be announced shortly, before raising their prime lending rates," M. Venugopalan, Chairman of Federal Bank, said. Most floating rates are based on the PLR.
Several customers seem oblivious to the interest rate revisions since there has been no change in the EMI, but unknown to them, the period of repayment just gets extended. "The interest rate for my Rs 12 lakh housing loan has moved up to 10.25 percent from the 7.25 percent that I started out with couple of years back. But I never felt the pinch till I went to the bank for my year-end appraisal," Pravin Kumar, an employee of a pharmaceutical company said.
But some other customers are sitting pretty. "I was quite lucky to have locked up my Rs 17 lakh housing loan at a fixed rate of 7.5 percent couple of years back. Several of my friends who had advised me to opt for the 0.25 percent floating rate differential have not been as lucky," said Shilendran, General Manager with a leading hotel group.
Even as the threat of imminent surge in interest rates loom large, the Free Reference Rate of ICICI Bank, the major player in the housing loan sector has already gone up by 50 basis points to 10.75 percent as on June 2006 and every new customer would be granted loans at the rate of 9.5 to 9.75 percent. The fixed rate is already hovering at 11.5 percent. Further revisions would take the rates beyond the 10 percent levels even for new customers.
Any comments from fellow members here ????