Bring equality among old and new home loan borrowers over interest rate.
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Buying or constructing home is one of the very import event of any human being allover world. This is one of the life changing event for any middle class person especially in India. Many of us choose to borrow money, sell any other property and arrange fund for funding while making our own home.
To help this process further banks or HFCs(Housing Finance Companies) has came up with an easy way of lending loan to seekers as Home Loan, which can be paid as EMI over many years.
Apart from any other loans this is one of the long tenure based loan which basically comes with 5-30 years. Along with the borrower, the banks even get benefited by receiving a huge amount of interest. The interest rate is can be of Fixed or Floating. Normally People choose to avail loan by Floating rate to get benefited on interest rate reduction and it works the same for the bank if there is increase in interest rate.
Now comes the catch, if the interest rate increases the bank silently increases the EMI, but when there is a reduction of interest rate there is a conversion fees. Also during a period when a person takes loan when rate is less get benefited but an old customer still pays the higher rate.
To address this issue and to make all the borrowers pay the same interest rate, On 19-Oct-2011, National Housing Bank (https://en.wikipedia.org/wiki/National_Housing_Bank) issued a circular http://www.nhb.org.in/Regulation/pol%20cir-44.pdf
This circular says that HFC will charge uniform interest rate for old and new customers who are on a floating interest rate. This was irrespective of the fact when the home loan was availed. In other words, the concept of home loan conversion fees was abolished.
Unfortunately, this rule was never implemented and NHB quietly withdrew this circular on 22-Aug-2014. See the link http://www.nhb.org.in/Regulation/NHB-ND-DRS-Policy-Circular-No-64-14.pdf
So my request to NHB, RBI that, please bring this rule and save borrowers from paying more money to HFCs and bring equality among old and new home loan borrowers.
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