While there’s a race for grabbing a large share of the home loan market through ‘teaser’ rates by banks, the government today warned that such schemes could land borrowers in financial distress.
“…Borrowers with low financial means may get attracted to take such loans on finding the initial low interest rates to be within their financial means, but may land themselves into a financial distress should interest rates start rising…,” Minister of state for Finance Namo Narain Meena told the Lok Sabha.
The caution was voiced by Meena at a time when the two leading private lenders -HDFC Ltd and ICICI Bank -relaunched teaser rates, offering loans at an interest rate of 8.25 per cent for the first year, followed by 9 per cent in the next and the market rate thereafter.
India’s largest lender SBI is already continuing with a similar scheme.
Commenting on the implication of such concessional interest rate loans, Minister of state for Finance Namo Narain Meena said the resulting delinquency would have adverse impact on the financial stability of the lending banks.
India’s banking regulator -the Reserve Bank of India (RBI) had also expressed concern on banks offering home loans with teaser rates, or schemes where monthly instalments rise after the initial years.
“Teaser rates are increasingly being offered which is a cause for concern,” said Usha Thorat, deputy governor, RBI had said. PTI ICICI Bank relaunches cheap home loans Country’s largest private sector lender ICICI Bank has re-launched its special home loan plan, also called teaser rates, to attract property buyers. “Mortgages continue to be a focus area for ICICI Bank. We offer competitive rates in the market and currently the rates are 8.25 per cent for first year, 9 per cent for the second year and the existing floating rate thereafter,” said a spokesperson of ICICI Bank.
The two other major financial institutions which are offering teaser rates are State Bank of India and HDFC.
Does the teaser rates worry you or it worries you that the Govt. is interfering ?
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the teaser rates worries me. this (resulting delinquency) is what led to global meltdown of 2008.
Here is another nice read on what happened to the home loan teaser rates in India.
http://www.indianrealestatefordummies.com/2011/07/hey-wtf-is-happening-to-home-loan.html
According to me, young people can afford to take a home loan and purchase a house. All banks have a large presence in the home loan market, we can say that the era of “teaser rates” is now over in India.
I think loan faculties is only for middle class people but every budy is used and for our purpose.. and this good but some time we are we are in problem when we can’t pay monthely or payment of loan than it is very erratic and panic for us …Thank for this great share with us
“Teaser rates are increasingly being offered which is a cause for concern, Some Banks are re-launched its special home loan plan, also called teaser rates, to attract property buyers. “Mortgages continue to be a focus area for this issue http://gethomegetloan.com/l_compareinterest.php, http://gethomegetloan.com/l_teasercalc.php, so we can see before we decided the bank.
Banks will never stop projecting teaser rates as they are bringing maximum business from the market…….