Thursday, August 9, 2012

No Penalty on prepayment during floating stage under Dual Rate Scheme

Mumbai: Borrowers who availed of dual rate home loans, which were hugely popular between 2009 and 2011, will be allowed to prepay loans during the floating rate phase without a penalty.


The National Housing Bank has revised its earlier decision where it had said that dual rate loans would be classified as fixed rate loans if at the time of signing the contract the loan was subject to a fixed rate.


Since a big chunk of home loans that were availed during 2009-2011 were dual rate, a large number of borrowers will benefit as these loans are transforming into floating rate after having completed its fixed duration.


These borrowers who raised loans at interest rates ranging from 8% to 8.5% found their interest burden jumping to over 11.5% as the rates switched to floating. This was because interest rates had moved up sharply between 2010 and 2011 when the Reserve Bank of India raised its key rates 13 times.


When contacted, a spokesperson for HDFC said:...

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