Some of the banks started giving choice to their customers to opt for lower interest rates under their home loan scheme for existing customers in order to keep them intact as many customers are flocking away to other financial institutions due to high interest rates. They charge one time conversion fees of 0.5% to 1% on the outstanding home loan amount for this. SBI, ICICI bank and HDFC banks are some of the banks in this category.
SBI has allowed home loan customers to move to lower interest rate after paying a conversion fee of 1% on their outstanding principal. Customers can save as much as 0.5-3% on their interest rates, if they convert their home loans to the lower interest rate regime. Other banks like ICICI bank and HDFC also offer this conversion to their customers. HDFC has gone a step ahead and slashed their conversion fee from 1% to 0.5%. So, competition in the home loan market seems to be hotting up.
So it is wise for home loan customers to check up with their bankers (free toll number) about latest offers of bank loans with interest prevailing to check whether they can opt for it thus gaining advantage without disturbing other set up like documents etc. It appears now that with the present inflation and high deficit financing in india, the rate cut will be very nominal and it will go down maximum 1% in two year’s span. So sometime, it is beneficial to opt for fixed interest rate for first 2 to 3 years and opt for floating rates for the rest of the period. Ofcourse, customers should see that pre-payment penalty is not there in their new scheme.
C.R. Venkata Ramani