`Step-up' repayment products -HDFC BANk

`Step-up' repayment products -HDFC BANk

The country's largest housing finance company HDFC has said that it would not offer 'interest only' mortages, which were launched by SBI on Monday, but was offering `step-up' repayment products. The corporation also does not see interest rates coming down until after the budget following Reserve Bank of India's unchanged monetary policy on Tuesday.

Speaking to ToI, Keki Mistry, VC & MD, HDFC said that he expected that there would be further rate cuts during the course of the year but fewer than earlier expected. "In the short-term this is as good as it gets. Going forward, if budget is in line with expectations and global situation stabilises we expect 25-50bps during the year as against 50-75 basis points cut expected earlier." A basis point is one hundredth of a percentage point.

Mistry's comments come after the RBI governor Raghuram Rajan left key policy rate unchanged in his sixth bi-monthly monetary policy review. The governor has said that higher wages following implementation of the seventh central pay commission would provide upward pressure to prices.

On Monday, State Bank of India (SBI) introduced an interest only home loan which allows the borrowers to make lower repayments in initial years and thereby be eligible for larger loans.

"We already have a loan product which allows borrowers a lower instalment in earlier years with a subsequent increase in equated monthly instalments as they move ahead in their careers. This scheme entitles borrowers for a higher loan. But we have not seen many takers for this product," said Mistry.

Even in cases of under-construction projects the corporation allows borrowers to pay interest only during the construction period in the form of pre-EMI payment. "Our experience is that borrowers want to start repaying their loans as soon as possible," said Mistry.

Source:BankingUpdates