Indian lending institutions are competing against each other like never before to increase their home loan takers. Recently, HDFC, one of the most important market players in the home loan segment, has bagged the best retail bank award. And mind you this fabulous performance has been boosted by its stupendous performance under the home loan category. Cutting across a range of parameters the bank has beaten many rivals in the Central Asia, Gulf Cooperation Council and Asia Pacific.



Home loan rates in India is one super-powerful digit which controls the fates of millions of households across the nation. Housing Development Corporation Ltd. (HDFC) Chairman, Deepkh Parekh estimated last month that the home loan rates might have reached their peak. According to him the interest rates are directly linked to the inflation prevailing. But under the current situation of liquidity crisis, which is forcing the banks to pump in more money thus putting more inflationary pressure in the market, the rates might still move up still. It is thus necessary for bringing down the home loan rates that the inflation is curbed with immediate effect.





As per the estimates made by the Punjab National Bank, home loan rates are not going to stabilise before March 2009. Reserve Bank of India’s decision to increase the cash reserve ration (CRR) and the repo rate in order to control the high inflation has resulted in tightening of the interest rates. RBI had increased the CRR by 25 basis points and the repo rate by 50 basis points following which most of the public sector banks took their trademark lending rates to 14 percent.



The real rates at which one is able to avail the loan depends upon the customer’s financial profile, his/her abilities of negotiation. Allahabad bank provides these loans at the floating rates ranging between 10.75 to 11.5 percent, while the fixed rate varies between 12.25 to 13 percent. In this range, the prospective buyers can try to negotiate the deals as per their capacity. Some other banks have invariable range for both the fixed and varying rates of interest.



With so much at stake, home insurance plans are the talk of the market presently. With the housing needs increasing like never before, the places of residences have acquired a value like never before. In fact they have become as dear as the life itself. So the home insurance plans are being offered by the insurers and the lenders alike.



Whether to go for the fixed or variable home loan rate can be the trickiest question of your life. Any silly decision on this part can make your housing plans go haywire. So one must try to assess the market trend of the last six months in order to evaluate the costs and benefits accruing from one option or the other. Since the floating rates are subject to the prevailing market rates, these are constantly updated by the banks. Such rates are known as ’Adjustable Rate home loans’.



The interest rate figure is dependent upon the bank’s prime lending rate and the fixed deposits. It is advisable to opt for the ’transparent floating interest rates’ on such borrowings. It is because such a plan will give you finances at about 2 percent cheaper than the fixed rate plan. In fact about 90 percent of the home loan takers go for the floating rates. But sometimes the decision of the majority might land you in trouble, as it happened in the recent past in the Indian home loan market. Due to the unexpected turn of events the floating rates went through the ceiling because of the prevailing world-wide liquidity crisis. So choose your plan with your own rationale behind it.