NEWS & ADVICE : HOME LOANS
Are fixed home loan rates actually ‘fixed’?
By Vaibhav Aggarwal
Print    Email    RSS   

But is it really the case?

The answer might come as a surprise to some. It hardly is the case. Confused over the mystery?

It really is no mystery. The reason for this article is to try to solve that mystery regarding the nature of fixed interest rate housing loan transaction for you so that next time, you could make an informed decision over the matter.

The answer, as always lies in the thick piece of document which is provided by the banks: the terms and conditions of the bank. The document which was signed by you, finalizing the details of the loan and accepting all the norms, as decided by the bank, is what allows banks to modify the definition of fixed as learnt and believed by you.

Every home purchase loan agreement document, as provided by the banks, includes a reset clause on fixed interest rate. This is the clause which makes it possible for bank to change a 7 percent rate of interest into a 14 percent rate of interest! So if you had taken the loan @ 10.5 per cent for 15 years, it does not mean that the same rate will be applicable all across the period.

For instance, State Bank of India (SBI), India’s largest public sector bank has introduced a clause in its agreement papers, as per which it has right to revise the fixed rate home loan after a period of two years. Canara Bank and Corporation Bank also have similar provisions to revise the rates after 5-years of disbursing the loan.

Public sector lenders are not the only ones who have this reset clause. All private sector banks and Non Banking Financial Corporations (NBFCs) also follow the same policies and the rates are revised from time to time.

Force Majeure Clause

If you read your home loan agreement papers carefully, you can spot this statement:

“Provided further that from time to time, the bank may in its sole discretion alters the rate of interest suitably and prospectively on account of change in the internal policies or if unforeseen or extraordinary changes in the money market conditions take place during the period of the agreement.”

This is the clause which gives banks and lenders the power to modify the interest rates on home loans they have sanctioned to their borrowers. This clause which questions the definition of ‘fixed’ is also better known as Force Majeure Clause.


Page    | 12 |
(Comments Posted : 5) Post Your Comments
1. According to www.housing.com, Your EMI remains the same irrespective of the conditions prevailing in the market. For more details, Please visit https://housing.com/in/home-loans/faq/61-pros-and-cons-of-fixed-rate-home-loan
Sachin (Posted: Oct 20, 2015)
2. Do you need a quick long or short term loan with a relatively low interest rate as low as 3%? We offer business loan, personal loan, home loan, auto loan,student loan, debt consolidation loan e.t.c. no matter your credit score.

* Personal Loans (Secure and Unsecured)
* Business Loans (Secure and Unsecured)
* Mortgage Loans (Secured and Unsecured)
* Consolidation Loan and many more.

Contact US for more information about loan offer and we will solve your financial problem. contact us via email: zionloanfirm.ltd@aol.com
Richelle Watford (Posted: Mar 25, 2015)
3. Thank u sir for your valuable information. Generally people don't know how different banks cheat them through various "Terms & Conditions". Banks should not be allowed to use "Fixed" interest rate term in this case..
Dipesh Modha (Posted: May 31, 2013)
Show All Comments
COMPARE QUICKLY
 Select a product:
 

CALCULATE QUICKLY
 Select a product:
 

EDITORS' PICKS
Get rid of your home loan faster
Home Loans come with Tax Rebates!
Bank loans that could glitter for you
Credit profile and its effect on loan...
Carnival of Indian Personal Finance Blogs #1


PINJORE: CaℒL Giℛℒs In PiNjOrE 09915787550...
PINJORE: CaℒL Giℛℒ In PiNjOrE 09915787550...
how to gate my home loan certificate

NEWS THIS WEEK
Canara Bank earned a profit of 60%. Feb 6, 2015
New Branch of Laxmi Vilas bank at Vijayawada Jan 30, 2015
Home loan EMIs expected to drop down Jan 21, 2015
Corporation Bank received MSME banking excellence award 2014 Jan 19, 2015
Home loan rates set to fall, after reduction in repo rate Jan 16, 2015
News Archive