Loans in India May Become Too Expensive, Experts Claim
Those Indian citizens who are trying to fulfill their dream of owning a house through housing loans may have to reassess their budget first since the State Bank of India (SBI) recently announced to increase their rates on housing, mortgage, and other loans.
A Sudden Decision
SBI had revealed that the increase in the housing loans was due to the interest rate on retail deposits. The interest rate of the said payables had increased, together with the Marginal Cost of Funds Lending Rate (MCLR), by up to 20 points. A financial expert from the Mirae Asset Management explains that the increase of interest rate was expected following the country’s financial performance last year. Based on a 2017 report, the liquidity of the lending market has gone down. This prompts the banks to raise their interest to earn more money and profit to keep the lending services of the banks running.
The Counter-response Against Slow Progression
Aside from the house and mortgage loans, the Bank of India also stated that they’re going to raise their interest rate on Fixed Deposits (FD) due to the following increases of MCLR for the past two months. This is good news for those depositors and investors who can now grow their money more efficiently through FD.
The Bank of India released a statement in hopes of balancing out the interest rate hikes on home loans and mortgage loans. Furthermore, the Bank hopes that this will encourage more depositors to open a deposit account and deposit their money through the banks.
A Gradual Implementation of Interest Hikes
In order to help the investors, depositors, and lenders prepare for the changes in interest rates, the SBI gave a grace period for the banks to implement the changes. The SBI anticipated that the bank investors and depositors may start seeing the higher return of their money from 6-12 months. This is because the new interest rate for fix deposits will only take effect every six months after the FD matures.
The Fund Investors and Borrowers May Need to Prepare For the Impending Interest Rates
Despite the higher interest return rate of FD, a group of borrowers and investors warned the public of the increased interest rates. The increase usually raises an alarm bell to the financial sector since this phenomenon may create a domino effect on different aspects of the economy.
For instance, the high-interest rate will suppress the prices of funds and bonds, which results in the significant decrease of NAVPS. And if the net asset values per share of bonds decrease, so thus the investments of the investors. This spike in the interest rates greatly affects the bond funds. In fact, India’s long-term gilt funds lost about 2.1% of its total net profit during the last 3 months already. And the statistics show that the trend will continue to go downwards.
Finding Alternative Short-Term Investments
Aside from the decline in bond funds, investors also need to take into consideration the volatility of the stock market. This affects the investment in stocks and mutual funds too. If you’re not comfortable with the recent downward trend of long-term funds and investment, Jajoo advised the investors to try out short-term funds instead. Through these funds, you can only invest your money in a short period of time (usually 1-2 years) and the returns are still high and pretty stable. Furthermore, you can always opt to stop your investment after 2-3 years.
For those borrowers who wish to acquire a home, mortgage, and other loans, there may be a tough road ahead of you. You may need to start reassessing your budget because the interest hike will shape your home loans.
More in Loans & Credit
Elon Musk Remains the Chairman After Tesla Shareholders’ Unanimous Votes
Tesla CEO Elon Musk has survived an attempt by shareholders to overhaul the electric car maker’s board of directors to dethrone...March 6, 2018
Dem Senator Barred from Entering an Immigration Detention Center!
Last Friday, the Democratic Senator of Oregon, Sen. Jeff Merkley shared a disturbing Facebook video last Sunday showing how the officers...March 6, 2018
Trump Said Canada “Burned the White House Once” as Trade Tensions Between Two Rise
As the trade tensions between the United States and Canada continue to rise, Prime Minister Justin Trudeau expressed his objection to...March 6, 2018
Available Jobs in US Outnumber Jobless People
This spring, the U.S. had more job openings than unemployed Americans. For the first time since 2000, the number of available...March 6, 2018
Rats Seen in Bags of Buns in Burger King; Branch Shut Down
When eating fast food, one of the primary concerns that we all have is whether the food is clean enough. There...March 6, 2018
Mrs. West Discussed Prison Reform With Trump, Lead to Release
Kim Kardashian West had a meeting the previous Wednesday at the White House with the President alongside other officials like senior...March 6, 2018
Paris Hero Offered an Internship with Local Fire Brigade
Ever since we were children, it has been implanted into our minds that good deeds get rewarded, while bad deeds are...March 6, 2018
A Tesla Car in Autopilot Mode Collided into an Emergency Vehicle!
In this modern world where technology continues to evolve, giant car companies like Tesla, BMW, Mercedes, and others, are heavily invested...March 6, 2018
Televangelist Revealed God Told Him He Needs the 4th Private Jet Plane!
The renowned televangelist Duplantis asked his followers some donations to purchase an astounding $54 million private jet. The plane will be...March 6, 2018