Dual-rate Housing loans: The next thing in the housing loan sector
By Natraj Muthukrishnan on 2 December, 2009, 10:09 am
After a war among mobile operators over 1 paise per second plan and other attractive offers, the season for war among banks seem to be the next in line. The country’s largest bank , the State Bank of India had recently introduced what was first of its kind housing loan scheme in which a borrower pays a fixed rate of 8% for the first year and 8.5% for the second and third years. From the fourth year, the borrower can opt between a fixed and a floating rate. This was introduced to attract new prospective home buyers towards SBI, which going by personal experience is one of the best banks to opt for a housing loan.
This offer was criticized by other banks in the competition stating the fact that it can lead to defaulters among the borrowers once the rate surges after the fourth year. But these banks have eaten their own words. Recently, HDFC bank has introduced its own version of dual-rate housing loan. Under the scheme, the borrower is charged the same rate till the period of March 2012 and a floating rate thereafter. For instance, under this scheme For a 20-year loan of Rs 30 lakh, a borrower will pay a fixed rate of 8.25% up to March 2012 and then a floating rate. This special festive offer rate is applicable to all new home loan customers who apply before January 31, 2010, and take at least part disbursement before March 31, 2010.
Will this trigger a competition among all the banks to introduce the dual-rate system and more importantly will this cause existing borrowers to switch loyalty from one bank to the other in pursuit of an attractive offer. Let’s wait and watch.
[...] All banks offer a starting rate of 8 % which gradually climbs upto 11% by the end of second year. One execption to this was the dual rate offer from SBI, about which we had spoken here. [...]