| Credit policy won’t raise your home loan rate
Reserve Bank of India (RBI) Governor YV Reddy on Tuesday unveiled the quarterly review of the credit policy. Ordering banks to keep a tight leash on lending, it hoped to keep inflation within manageable limits. Here's how the policy affects you. Will your loans get costlier? Home loan and other consumer loan rates are unlikely to rise. There is cash aplenty, but it comes with a healthy leash. What about fixed deposits? Banks were set to cut interest rates on deposits as they had more cash to lend. With the RBI mopping up some of it, they are unlikely to cut fixed deposit rates. Reddy did this by raising the cash reserve ratio (CRR), the proportion of deposits that banks must keep as cash with the RBI, to 7 per cent from the present 6.5 per cent.
Interest rates unchanged in RBI's new credit policy
That should be good news for those paying back home loans in particular or is it? "I think the home loan and credit rates should not be affected. The RBI has done a fabulous balancing act," said CMD of Bank of Baroda Anil Khandelwal. The good news is on the interest rates front as the RBI has refrained from increasing interest rates two times in a row with the Bank rate remaining at 6 per cent, the repo rate at 7.75 per cent and the reverse repo rate untouched at 7 per cent. But the Cash Reserve Ratio (CRR) has been increased by 50 basis points to 7 per cent. .
Home loan rates unlikely to come down
India's largest home finance company had plans to cut home loan rates. But now those plans are off with the Reserve Bank of India's announcement on Tuesday to hike the cash reserve ratio by half a per cent, HDFC is in no hurry to reduce interest rates.
''I don't see much impact, home rates will be stable, no reduction. We will be reviewing our rates in three to four weeks," said Keki Mistry, Managing Director, HDFC.
However mortgage companies are divided on whether there could be a small spike in home loan rates. On the one hand by allowing banks to park more funds with RBI has softened the impact of the CRR hike.
On the other hand cost of funds for banks is expected to go up and this may have a bearing on home loan rates. Banks alone are expected to take a hit of over Rs 1,300 crore this fiscal with the CRR hike which could impacts the profitability of some banks.
1 Aug, 2007, 0042 hrs IST, TNN
MUMBAI: Once again, the faceless Indian and countless households will foot the bill for the war on inflation. They will have to accept lower returns on bank deposits, but will have no respite from high interest rates on home loans. Hard luck for new home buyers, who were hoping for rates to soften a little before taking the plunge.
Now, there's a higher levy on the banking system, and individual savers and retail borrowers will have to bear it. On Tuesday, Reserve Bank of India (RBI) governor Yaga Venugopal Reddy announced a hike in the cash reserve ratio (CRR) for banks by half-a-percentage point to 7%, even as he kept key rates unchanged. CRR is the slice of customer deposits that banks set aside as cash with RBI. Since this money lying with the central bank does not fetch any return, a CRR hike is like a `tax' on banks, who recover it from customers.
Fed keeps key interest rate steady
Wall Street turbulence, Main Street credit problems and a nationwide housing slump pose increasing risks to the economy, the Federal Reserve said Tuesday, even as it left interest rates unchanged. Although Federal Reserve Chairman Ben Bernanke and his central bank colleagues acknowledged challenges that have intensified since their last meeting in late June, they nonetheless expressed hope that the economy will safely make its way. The policymakers also stood by their belief that the biggest potential danger to the economy is that inflation won't recede as they anticipate. Against these economic crosscurrents, the Fed left an important interest rate at 5.25 percent on Tuesday. In turn, commercial banks' prime interest rate for certain credit cards, home equity lines of credit and other loans -- would stay at 8.25 percent.
Watch that credit score! It could end up costing a lot
Not paying attention to your credit score can cost you a lot of money. Many people don't know that their score -- a three-digit number derived from an analysis of how they handle debt -- is the key determinant of what interest rate they'll pay on credit cards, auto loans and home mortgages. The lower a person's score is, the higher the interest rate and, therefore, the higher the cost for the loan. A new study by the Consumer Federation of America and Washington Mutual Inc., the Seattle-based savings bank, found that fewer than six out of 10 Americans have obtained their credit scores, and half of those surveyed consider their understanding of the scores as "fair" or "poor." Stephen Brobeck, executive director of the nonprofit CFA, which is based in Washington, D.C., said he found the statistics disturbing because consumers can't work to improve their scores if they don't know what the scores are.
HDFC posts 40% growth in interest income
Be it higher rates or higher property prices nothing seems to be deterring consumers from buying homes.
Earnings from the country's largest home lender HDFC reflect strong growth in lending as well as lending margins despite a sharp rise in interest rates.
Loans and disbursals for the quarter rose solid 29 per cent with margins rising to 2.22 per cent from 2.18 per cent from the previous quarter. This led to a 40 per cent growth in net interest income and a 26 per cent growth in PAT.
"We have seen no slowdown in lending because of rates, demand is strong and we have also managed to not only maintain our margins but also grow our margins, " said Keki Mistry, Managing Director, HDFC.
While HDFC's market leadership position has helped it maintain growth, other banks in the home loan market have not been as fortunate.
|
