Can we expect further decrease in Home Loan Interest Rate in next financial year?

POSTED BY amitpuja ON February 20, 2014 8:48 pm COMMENTS (8)

Hi Manish,

I am planning to switch my home loan from HDFC to LIC HSG Finance. Currently, HDFC is charging me 10.75% interest. However, LIC is offering 10.20% (fixed for 2 yrs). Can you please suggest if I can expect further decrease in Home Loan Interest Rate in next financial year in LIC? Or is 10.20 is a good deal considering my laon amt is 60 lakhs. HDFC is charging 0.25% as conversion fee to convert ROI to 10.25% (which is around 17,000). While, I have to spend 30,000 for processing and sanction in LIC. Please suggest 🙂

8 replies on this article “Can we expect further decrease in Home Loan Interest Rate in next financial year?”

  1. ashalanshu says:

    Dear Amit, as per old hindi proverb, here goes my answer.

    Der aaye Durust aaye. 🙂

    Thanks

    Ashal

  2. amitpuja says:

    Hi All,

    Thanks a lot for your valuable comments 🙂

    I enquired more about LIC HFL. The current RPLR is 14.50 while the Base rate(spread) they are offering me is 2.50.
    The first 2 yrs are fixed at 10.25 ROI. However, the ROI from the 3rd year will be 12%(RPLR-Base) (14.50-2.50=12%) which is considerably high and I have to pay conversion fee again 🙁

    I think the best thing to do right now is to pay conversion fee of 17000 to HDFC and later after few yrs move to PSU banks.
    Guys, what do you think ?

    Thanks,
    Amit

  3. ashalanshu says:

    Dear Amit, HDFC and LICHFC both are Housing finance Companies and are governed by National Housing Bank not RBI. Hence Impact of RBI’s interest rate policy ‘ll be same on both institution. In case you are comfortable with LIC, please opt the same. No reason to worry for future rate speculation as you are getting the comfort of fixed rate for 2Y.

    Thanks

    Ashal

  4. Raja says:

    Just an advice, if you are planning to shift home loan, do not shift to LICHFL. It is NOT a bank but a financial institution. It will not vary its rates as per RBI base rates. You should consider shifting to SBI if you want to go with a PSU bank only. Lot of my friends have shifted out from LICHFL because it was not flexible after a few years. But as Ashal said, just pay 17000 to HDFC itself to get to a lower rate. Doesnt make sense to shift bank for a difference less than 1-1.5%

  5. amitpuja says:

    Hi Ashish,

    The ROI at HDFC is always higher than other PSU banks.

    If LIC increases ROI to 11.20 after 2 yrs, why would HDFC give at lesser ROI? The only thing I see here is security for atleast 2 yrs and LIC being a PSU bank the chances are less that they will increase the ROI drastically.
    Also, I am planning to close my loan as early as possible.

    Thanks,
    Amit.

  6. ashalanshu says:

    Dear amit, why are you not opting for lower ROI in HDFC itself by paying just 17000 Rs?

    Thanks

    Ashal

    1. amitpuja says:

      Hi Asha, That is a option, but I am afraid if HDFC again raise their ROI, It’s has just been less than a year for my home loan and HDFC has raised my ROI 3 times from 10.40 to 10.75. If RBI riases repo rate, HDFC is the first one to raise ROI for existing customers.
      However, LIC is offering a fixed ROI of 10.20 for first 2 years. Atleast I wont have to worry too much of the fluctutating ROI for first 2 years.

      1. Ashish Garg says:

        Hi Amit,

        What will happen if after 2 years LIC raises their rates to 11.20% per annum? Will you shift the loan again to some other lender and pay the processing charges again? No one can predict the future interest rates but can only speculate about it. You may hear people saying yeah the rates will come down in near future (but no guarantee).

        Also, please do check the experience of other borrowers (some of them have shared their experience in this forum itself) and see if it makes sense to move to LIC or change the rates with HDFC itself.

        Ashish

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