Relief for home buyers
It might come as a relief for homebuyers hit by a volatile floating rate loans. The National Housing Bank (NHB) has planned to use a large portion of tax-free bond proceeds to shore up long term fixed-rate mortgage loans manily for low and moderate income housing in urban areas and suburbs. NHB has been working on bridging demand-supply gap. In 2013-14, NHB raised Rs 4,000 crore in tax-free bonds and another Rs 3,200 crore in low-cost funds from overseas, last financial year. These funds will be used by NHB to refinance banks and housing finance companies (HFC). The tenure for these loans will be around 15-20 years.
A majority of loans are offered at floating rates, which are linked to the base rate or benchmark prime lending rates. Whenever the rates are hiked by the RBI, monthly EMIs or the repayment periods and sometime both get increased. Though loans are also offered on fixed rates but they usually higher interest rates are thus expensive, at least in short term.
Recently, NHB had announced reduction of rates on its special refinance scheme to 8.25% from 8.5% for loans up to Rs 5 lakh. The NHB decided to cut rates to 8.5% from 8.75%, for loans upto Rs. 10Lakhs. This is targeted at low and moderate income segments.
Source: Financial Express
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