Base rate to help old home loan borrowers

By | June 2, 2010

With the base rate era setting in from 1st July 2010,  the old home loan borrowers might receive a chance to negotiate for a lower interest rate as it is believed that various banks would be re fixing their lending rates once the base rate sets in.

RBI has already stated that the current customers should be offered an alternative between continuing with their old home loan rates or move to new rates decided by the base rate system.

Numerous public and private sector banks would be repricing their retail loans 1-2% points higher than the base rate so as to remain competitive.

An official of State Bank of India said, “The new customer may enjoy rates in the region of 9-10%, while existing customer will still be paying 1-2% below the existing prime lending rate which for some banks is as high as 13.75%,”.

As per the new system of lending, the banks would not keep the base rate high for the fear of losing clients in the competitive atmosphere.

The SBI official said, “In order to be competitive most banks will keep the base rates in the range of around 8-9%. Customers who are in the mid-term of the loan period and are paying interest in double digits will have an advantage”.

But banks have not clarified if they would be offering the benefit to the old customers. An official of a private bank said, “It will depend on the customer profile as well. Generally banks tend to hold on their retail customers even if they have to pass on a 50 basis points (0.5%) rebate”.

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