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Banks start raising home loan rates; fixed rates can go up tooBy Dr arvind, Section Finance & Taxes
Two days after RBI upped the repo rate and cash reserve ratio, two leading public sector banks State Bank of India (SBI) and Union Bank of India (UBI) hiked lending rates by 50 basis points, or half-a-percentage.
People taking a home loan on Friday will pay a higher rate of interest, and bigger EMIs. Other banks too are likely to raise loan rates in the next couple of days.  The upward revision of rates by SBI and UBI means that the component of interest paid by borrowers in their EMIs will go up by Rs 34 per lakh per month on a 20-year loan, and by Rs 32 per lakh per month on a 15-year loan. EMIs may not be reset immediately, but the tenure of loans will get longer. There's more bad news. Even those who borrowed money on a fixed interest rate might have to pay more. Several lenders like ICICI Bank, ABN AMRO Bank, IDBI Bank and LIC Housing Finance have a clause in the fine print of their loan agreements, claiming the right to review the terms of repayment entirely at their discretion. HDFC Bank had such a clause in its 2006 fixed rate agreement, but has withdrawn it since. Click on "Full Story" For Full Coverage
Fixed rate home loan borrowers watch out: your rate can rise
Don't be surprised if your bank raises the rate of interest on your home loan even though you've borrowed at a fixed interest rate. Many devils could be hiding in the details of loan agreements empowering banks to raise interest rate even for customers who have raised funds at a fixed regime, an event Indian households have not seen so far. Here's a little fine print lying in ICICI Bank's home loan agreements, on fixed interest rate: "In the event the BORROWER opts for the fixed rate of interest offered by ICICI Bank, ICICI Bank shall have the right at any time or from time to time to review and reschedule the repayment terms of the LOAN or of the outstanding amount thereof in such a manner and to such extent as ICICI Bank may in its sole discretion decide." Other lenders, including ABN AMRO Bank, IDBI Bank and LIC Housing Finance, have similar clauses (See table). In HDFC's case, such a clause existed in its 2006 fixed rate agreements, but "has since been withdrawn since then", a senior HDFC official said. Home loan borrowers would be the worst hit after Reserve Bank of India raised key lending rates by 0.5 percentage points to battle inflation that crossed 11 per cent last week. Experts said while the initial response of banks is to raise interest rates of the floating rate borrowers, there is enough scope to raise rates even for fixed regime customers, although these are done in extreme situations. "Banks might take some harsh steps," said K. Raghuraman, executive director, Punjab National Bank (PNB). Source: HT, 27/06/2008
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