Fixed interest rates fading, giving way to floating rates
By Joseph Samson
Oct 7, 2009
Print    Email    RSS   

The declining interest rates are creating problems for fixed-rate home loan seekers. The offers present in the market allow new borrowers to avail fixed interest rates for three to five years. Thereafter, they have to shift to the prevailing floating rates.

At present, ICICI and HDFC are amongst a few that offer fixed interest rates, but the difference between their fixed and floating rates is huge. ICICI offers fixed rate home loan rates at 16 percent and the difference between the fixed and floating interest rates is 6.75 percent. HDFC offers a fixed interest rate of 14.25 percent and the differential between the fixed and floating rates in its case is 5.25 percent.

There are other banks like Axis that do offer fixed home loan rates with option of periodic revisions.

KVS Manian of Kotak Mahindra bank said that the volatility in interest rates have increased drastically since the beginning of the decade. Bankers attribute this volatility to global events and inflow of cross-border money. In addition, they expect that the global economic recovery would further increase the interest rates and in such a scenario adhering to fixed rates would be a loss to the bankers.

Rupa Rege-Nitsure, Chief economist, Bank of Baroda said. "What we saw in 2002-03 cannot be repeated. Interest rates in those days were benign. There was no retail demand" In 2002-03, the difference between fixed- and floating-rate products was between 50 and 200 basis points and many borrowers shifted to fixed-rate loans that time to ensure they did not suffer because of rising interest rates.

LIC, Housing Finance Director and Chief Executive Officer, R R Nair said that some lenders had faced problems in the past by offering fixed rate home loans. He said that around 2006 when the rates started increasing, the lenders offering fixed rates started losing.

Banks like BoR and BoM have also cut down interest rates as a part of the festive offer.


(Comments Posted : 0) Post Your Comments
Show All Comments
 Select a product:

 Select a product:

IBA to push for MIBOR as the benchmark rate
7 most common Home Loan problems faced by...
Banking Ombudsman: to the aid of the customer
Identify the cheapest home loan offer
Prepayment on loans: 'To do or not to do'

PINJORE: CaℒL Giℛℒs In PiNjOrE 09915787550...
PINJORE: CaℒL Giℛℒ In PiNjOrE 09915787550...
how to gate my home loan certificate

Canara Bank earned a profit of 60%. Feb 6, 2015
New Branch of Laxmi Vilas bank at Vijayawada Jan 30, 2015
Home loan EMIs expected to drop down Jan 21, 2015
Corporation Bank received MSME banking excellence award 2014 Jan 19, 2015
Home loan rates set to fall, after reduction in repo rate Jan 16, 2015
News Archive