More Home Loan Schemes
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MORE HOME LOAN SCHEMES
In its recent monetary policy review the Reserve Bank Of India (RBI) kept the key policy rates unchanged and announced a 100 basis percentage point cut in the statutory liquidity ratio (SLR). The cut in the SLR is expected to increase liquidity in the banking system says greater Bangalore,
http://www.greaterbangalore.com/buildersanddevelopers_landdevelopers.html
What is SLR? The SLR is the percentage of total deposits that a bank has to invest in government bonds and other approved securities. The idea of SLR is to keep a good amount of funds in near-liquid assets that can be made available to borrowers on demand. Therefore, the SLR is a restriction on a bank’s leverage in pumping more money into the economy. A higher SLR means less availability of funds with banks to lend and vice versa. Implication of SLR cut The current 100 basis percentage points cut in the SLR means the banking system will have around Rs 66,000 crores more to lend. This will not reduce the cost of funds for banks directly, but indirectly it does impact the cost. The SLR cut means banks will have more liquidity and they will offer lower rates on deposits. On the other hand, they will be more aggressive in lending to use this extra liquidity in hand. Impact of SLR cut on rates The reduction in the SLR may not directly result in an interest rate drop on schemes across the board, but smaller loans may see attractive schemes and offers, Banks are also expected to offer better deals on new home loan schemes to attract prospective homebuyers. Some analysts believe a part of the additional funds will be channeled into the real estate sector.
New loan accounts will benefit Since the SLR cut will increase liquidity in the banking system, it is expected that banks will go more aggressively on their new lending schemes. Therefore, an extra push form banks and attractive interest rate schemes on new home loan accounts is expected. There are expectations that the RBI will further soften the monetary policy (cut policy interest rates) in the coming months. Therefore, it will be better to opt for a loan scheme that follows a floating rate rather than lock-in to a fixed rate scheme. Scheme expected The cut in the SLR is unlikely to see any significant drop in the banks’ costs – base interest rate. Therefore, there may not be significant downward revisions in the interest rates of existing home loan accounts. However, as the RBI’s monertary policy stance is getting softer, banks are expected to come out with schemes that borrowers can choose to migrate to at a lower interest rate. Borrowers should keep in touch with their banks to find out about such schemes. Balance transfer The balance transfer of a home loan (switching of a home loan from one bank to another) is a hot topic among home loan borrowers. It gathers momentum when the interest rates follow a downward trajectory. Usually, it is seen that banks offer attractive interest rates on new loan accounts. However, it is important to keep in mind that the balance transfer of a home loan from one bank to another comes with certain costs. Borrowers should go through a thorough analysis of various expenses (new loan processing fee, documentation charges etc) as against the saving from a lower interest rate. As a thumb rule, the balance transfer of a home loan should only be considered if the interest rate difference is at least 1.5 percent or more, and the borrower plans to continue the loan for another five years at least.
Greater Bangalore Estates #007, Suranjandas Road, Geethanjali Layout New Thippasandra Bangalore -560075 Tel / Fax: +91 80 2520 3914 / 91 80 4092 3614
email: [email protected]
MARKETING OFFICE
No 340, 'Lakshmi Plaza' I Floor Bangalore - Hosur Main Road Hebbagodi Bangalore - 560 099
HOSUR BRANCH
No 58 'Vinayaka Complex' I Floor Bangalore - Hosur Main Road Hosur Town Hosur - 635109
In its recent monetary policy review the Reserve Bank Of India (RBI) kept the key policy rates unchanged and announced a 100 basis percentage point cut in the statutory liquidity ratio (SLR). The cut in the SLR is expected to increase liquidity in the banking system says greater Bangalore,
http://www.greaterbangalore.com/buildersanddevelopers_landdevelopers.html
What is SLR? The SLR is the percentage of total deposits that a bank has to invest in government bonds and other approved securities. The idea of SLR is to keep a good amount of funds in near-liquid assets that can be made available to borrowers on demand. Therefore, the SLR is a restriction on a bank’s leverage in pumping more money into the economy. A higher SLR means less availability of funds with banks to lend and vice versa. Implication of SLR cut The current 100 basis percentage points cut in the SLR means the banking system will have around Rs 66,000 crores more to lend. This will not reduce the cost of funds for banks directly, but indirectly it does impact the cost. The SLR cut means banks will have more liquidity and they will offer lower rates on deposits. On the other hand, they will be more aggressive in lending to use this extra liquidity in hand. Impact of SLR cut on rates The reduction in the SLR may not directly result in an interest rate drop on schemes across the board, but smaller loans may see attractive schemes and offers, Banks are also expected to offer better deals on new home loan schemes to attract prospective homebuyers. Some analysts believe a part of the additional funds will be channeled into the real estate sector.
New loan accounts will benefit Since the SLR cut will increase liquidity in the banking system, it is expected that banks will go more aggressively on their new lending schemes. Therefore, an extra push form banks and attractive interest rate schemes on new home loan accounts is expected. There are expectations that the RBI will further soften the monetary policy (cut policy interest rates) in the coming months. Therefore, it will be better to opt for a loan scheme that follows a floating rate rather than lock-in to a fixed rate scheme. Scheme expected The cut in the SLR is unlikely to see any significant drop in the banks’ costs – base interest rate. Therefore, there may not be significant downward revisions in the interest rates of existing home loan accounts. However, as the RBI’s monertary policy stance is getting softer, banks are expected to come out with schemes that borrowers can choose to migrate to at a lower interest rate. Borrowers should keep in touch with their banks to find out about such schemes. Balance transfer The balance transfer of a home loan (switching of a home loan from one bank to another) is a hot topic among home loan borrowers. It gathers momentum when the interest rates follow a downward trajectory. Usually, it is seen that banks offer attractive interest rates on new loan accounts. However, it is important to keep in mind that the balance transfer of a home loan from one bank to another comes with certain costs. Borrowers should go through a thorough analysis of various expenses (new loan processing fee, documentation charges etc) as against the saving from a lower interest rate. As a thumb rule, the balance transfer of a home loan should only be considered if the interest rate difference is at least 1.5 percent or more, and the borrower plans to continue the loan for another five years at least.
Greater Bangalore Estates #007, Suranjandas Road, Geethanjali Layout New Thippasandra Bangalore -560075 Tel / Fax: +91 80 2520 3914 / 91 80 4092 3614
email: [email protected]
MARKETING OFFICE
No 340, 'Lakshmi Plaza' I Floor Bangalore - Hosur Main Road Hebbagodi Bangalore - 560 099
HOSUR BRANCH
No 58 'Vinayaka Complex' I Floor Bangalore - Hosur Main Road Hosur Town Hosur - 635109
