SBI’s 8% Home Loan Scheme will End on November 8th

The country’s largest lender, State Bank of India, will not extend its eight per cent home loan scheme, the cheapest in the country, beyond November 8. SBI had introduced its Happy Home loan scheme, that allowed the borrower to freeze the eight per cent interest rate for a year, in February this year. In August, the bank had introduced another home loan scheme under a ‘My Home’ campaign, in which it offered loans up to Rs 5 lakh and tenure for up to 10 years, at an eight per cent per annum fixed rate during the first five years, among other offers.

However, the My Home campaign will come to an end on November 8. “The bank has taken a decision that the eight per cent home loan scheme will not be extended beyond November 8. It is yet to take a decision on the new interest rates. It is likely to be more than eight per cent,” said sources at SBI. Under the My Home Campaign, the bank was offering home loans in three segments, namely, SBI Hi-Five Home Loan, SBI Easy Home Loan and SBI Advantage Home Loan. Under the SBI Hi-Five Home Loan, it has been offering loans up to Rs 5 lakh and tenure for up to 10 years at an eight per cent per annum fixed rate during the first five years.

From the 61st month onwards, the rate will be a floating one, at an interest rate 2.75 per cent below the State Bank Advance Rate (SBAR) and 1.25 per cent below SBAR.

In SBI Easy Home Loan, for maximum loan of Rs 50 lakh and tenure of up to 25 years, the interest rate is fixed at eight per cent per annum during the first year and at 8.5 per cent during the second and the third year. After three years, the rate will be 2.75 per cent below SBAR (for floating rate) and 1.25 per cent below SBAR for fixed ones, with a reset frequency of five years. For loans above Rs 50 lakh and tenure of up to 25 years ( SBI Advantage Home Loan), the rate is fixed at 8 per cent per annum during the first year and 9 per cent per annum during the second and third year. From the fourth year on, the rate will be 1.75 per cent below SBAR (for floating rate) and 0.75 per cent below SBAR for fixed ones, with reset frequency of five years.

Source: http://www.indianrealtynews.com

Banks under CCI scanner for pre-payment penalty on home loans

Banks under CCI scanner for pre-payment penalty on home loans

November 03, 2009

Several banks and housing finance companies have come under the scanner of the competition watchdog for imposing penalty on pre-payment of loans.

The Competition Commission of India (CCI), according to its official, is scrutinising a complaint concerning pre-payment penalty from a customer against major home loan players like HDFC, LIC Housing Finance and Deutsche Postbank.

"The customer has said that he should have the choice of repaying the loan before the scheduled period as and when interest rates are low," the official said.

The complaint has been filed under Section 3 of the CCI Act that deals with abuse of dominant position by companies.

Although the Commission has yet to take a view on the matter, the official said, if the lenders were found guilty of abusing their dominant position, the practice could be banned across the industry.

The CCI, the official added, could also penalise the lenders for adopting such practices to discourage customers from pre-paying home loans.

Market leader HDFC, for example, currently levies prepayment charges ranging between zero to two per cent of the amount prepaid by a borrower.

During the pendency of an enquiry, the Commission can also provide interim relief by restraining the parties from carrying on the act which constitutes abuse of dominance, the official said.

The pre-payment penalties are imposed to discourage customers from retiring their debts before the scheduled date.

Some lenders charge only if the customer seeks refinancing the loan by taking money at a lower rate from some other entity.

Housing Loan outstanding at the end of March 2009 increased to Rs 2,63,235 crore as compared to Rs 2,52,932 crore at the end of 2007-08.

Source : http://www.realtyplusmag.com/rpnewsletter/fullstory.asp?news_id=5771&cat_id=2