Housing loan customers who had borrowed under the teaser rate schemes of banks would see their interest rates rise significantly from April 2012, the time when these rates would be linked to the prevailing market rates. Teaser loans accounts for 25% of the housing loan portfolio of Rs 5,10,000 crore, of which banks have a share of approximately 70%. While the HFCs (Housing Finance Companies) account for the remaining 30 per cent.
So far, the rising rates have not impacted teaser rate customers as their rates are fixed for the initial 2 -3 years and subsequently get linked to the prevailing market rates. Teaser rate schemes were launched in India early 2009 to stimulate dwindling home demand.
The RBI central bank has hiked key policy rates 12 times in the past 18 months. The reference floating rate for the industry has increased by 2-2.5% during this period, which translates into an average increase of 15%
in EMIs for house loan borrowers.
Highlights of Crisil Research report..!· According to the Crisil Research report, nearly 40% of the floating rate customers have opted for EMI increase, while 60% have chosen to increase their tenures or make a part payment.
· In aggregate, existing floating rate customers face an additional annual burden of around Rs 3,500 crores on account of higher EMIs.
· Assuming that 40 % of teaser rate customers opt for increased EMIs once their interest rates get reset to prevailing market rates from April 2012, they would have to pay an additional Rs 2,000-2,500 crore per year.
· Once the teaser loan portfolio gets linked to market rates from next year, it would increase the profitability of banks and HFC’s. The yield differential between the teaser rate and the reset rate is likely to be as high as 3-3.5 per cent.
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