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Rising Interest Rates Aiming To Deter Home Loan Defaults
By bikash
Individuals lining up for home loans in India have seen a marked change in the strategy of banks even as the consumers’ propensity to default with a raise in interest rates are being controlled.

Soaring interest rates have brought a significant change in trends of property prices in Delhi and Mumbai. They are witnessing a decline in contrast to a 60% rise in the past two years.

Indeed, the rising rates have also put off a number of home buyers who earlier cherished the hopes to buy houses as investment. Mortgage default is also not showing signs of slackening for the category that borrows to purchase a second home or an investment property as a source of rental income or to speculate on value addition.

Some banks are considering to lay emphasis on affidavits from first time loan borrowers stating that they do not own second house. The move is being planned in an effort to search for a system that can distinguish first time loan borrowers from second time.

First time borrowers who actually shop for home loans to buy property to live in are believed to be the sincere players and are

less likely to default than those buying property as another investment. Charging high interest rates on loans for a second house can upset non serious borrowers and individuals looking out for the finance options to buy homes.

For the past few years, there is a significant rise in income levels in India. Undoubtedly, by the time the loan will be repaid, the property values would also have shot up. Pre-payment of home loans is popular with consumers who can pay up to the extent of 10 per cent of the loan, after they will get their annual income.

Recent modifications brought by the RBI have relaxed the impact of increasing rates on mortgage lenders. The apex bank did this by opening itself to differential rate system to exclude borrowers who take small loan of the loop in its reduction of the risk weights on home loans to 50 per cent from 75 per cent.

Bikash kumar is the contributing author to the www.indianrealtynews.com for distinct articles and news. Indian Realty news provides news on commercial and residential properties of various cities like Delhi, Gurgaon, Mumbai, Chandigarh and Bangalore etc in India along with news on latest property investment, finance and property loan and laws in India.

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