Monday, March 5, 2007

Home loan rate hike set to upset customers’ budget

The recent appeal by finance minister P Chidambaram in the meeting of PSU bankers to spare any home loan hike suggested that the government does not want to lay any extra burden on home buyers. The FM categorically asked public sector banks to hold in abeyance any decision that hits the monthly budget of the common man. PSU bank chiefs immediately agreed and decided to freeze interest rates at the current level.

However, customers of private sector banks were not so lucky. On Tuesday, India’s largest private sector bank — ICICI Bank — announced a 1% hike in its benchmark rates on consumer loans, including housing loan. This is expected to upset many middle class family budgets.

Customers have availed of home loans at rates as low as 7.5% in the past and now the rate would be reset to around 11.75%, depending on amount. The rate hike could upset many middle class family budgets as the equated monthly instalment on housing loans is set to jump. Some bankers, however, feel that if the current trend prevails for some more time, it will affect the home loan business too.