Don't rush to switch banks for lower home loan rate, advise experts
The last few weeks have seen a flurry of activity in the home loan segment, led by major housing finance lenders
Sep 10, 2014
Source : The Economic Times
Home Loan


MUMBAI: Despite some large banks and housing finance companies reducing home loan rates a few days ago, industry-observers and planners are advising borrowers to adopt a wait-and-watch approach instead of hurriedly switching lenders.

The last few weeks have seen a flurry of activity in the home loan segment, led by major housing finance lenders. State Bank of India has slashed its home loan interest rates by 15 basis points for loans of over Rs 75 lakh.

Mortgage lender HDFC has also extended its scheme offering an interest rate of 10.15% for all loan amounts. Punjab National Bank, apart from reducing rates, has also waived off processing fee and documentation charges. ICICI Bank, on the other hand, has launched a fixed rate scheme charging interest of rates 10.25-10.50%, depending on the loan amount, for ten years.

The deluge of offers could tempt many to switch to a lender offering a lower rate to reduce the interest rate burden, given that prepayment penalties on floating rate loans have been abolished. Moreover, many banks, during negotiations, are willing to do away with or reduce processing fees to attract new customers. Yet, you should be cautious while taking a call on transferring your loan to another lender, say planners.

"In the competitive environment that prevails in the housing loan space, it is likely that once a large bank cuts rates, other banks will follow suit sooner than later. By delaying your decision on switching by a few weeks, you will be able to avoid the hassle of completing the charges, cumbersome paperwork and other formalities," says Suresh Sadagopan, founder, Ladder7 Financial Advisories.

You can also explore the option of internal switch -where the lender allows its existing borrowers to move to a lower rate that is offered to new customers after charging a conversion fee.

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