The much eagerly awaited thorny issue of prepayment penalty on Home loan foreclosure has finally found some relief by the announcement from N.H.B-National Housing bank a wholly owned subsidiary of The Reserve bank of India and a regulator for all housing finance companies that no HFC shall be allowed to charge prepayment penalty on home loans on floating rate of interest whether from own funds or take over by any bank.
This would apply to home loans on fixed rate prepaid from own funds but not on loans taken over by other HFC. Currently most of the HFC charges a pre penalty of 2%-4% on foreclosure whether from own funds or takeover. This decision was taken at the Banking Ombudsmen conference held recently.
One more issue resolved was the decision by the N.H.B to implement same floating rate of interest for new as well as existing customers already on board. Currently banks were implementing a differential rate of interest for old and new customers. Effect of the new policy and its implementation on loan against property is awaited keenly.
The RBI has been trying very hard to contain the rising inflation and one of the measures was by upwardly revising the rate of interest on home loans nearly 13 times in the past 2 years. As all things cyclical in nature the rate of interest prevailing now seems to have reached its nadir and it would be really providential if it starts falling. However the scenario is not likely to change very soon but can be expected eventually.
The banking ombudsmen and consumer courts were flooded with complaints from irate customers who wanted to shift their existing loans running at a higher rate to a bank offering a lower rate of interest but were often hampered by the high rate of foreclosure penalty that they were required to pay. With the borrower friendly decision being taken in the right direction at about the right time when customers have been heavily burdened by the rising prices and the higher cost of living at least one contentious issue has been resolved.
While Axis bank & Bajaj finance were already implementing the policy for some time now State Bank of India the apex bank and the country’s largest lender have announced their acceptance of the new policy roll out and all the other players are expected to follow soon.Not all banks have been able to come to terms with the new decision.
Tags: Banks, foreclosure, Home Loans, housing finance, loans, prepayment penalty, rate of interest
