Banks can now provide loans up to 90 per cent of the property value, for properties valued up to 30 lakh, and this is an outcome of reduced interest rates on loans. The Loan to Value ratio is now up to 90 per cent. For properties above Rs 30 lakh and up to Rs 75 lakh, the LTV is up to 80 per cent and those above Rs 75 lakh, the ratio comes in at 75 per cent.

Risk-weights norms for home loans have changed as well.

The change will affect under-process loans as well. The loan disbursement will happen at the new rates. The only rate that matters is the rate at the time of first disbursement as the loan gets linked to the base rate and spread at the time of disbursement.

Subsequent disbursements will be linked to the base rate at the time of initial disbursement, even if there is a change in the repo rates and base rates. The changes which get passed on to new customers, does not get passed on to existing customers as it is also linked to the term of loan.

Anyone who wants to switch over to the new rates will pay a switch over charge to avail the new benefits. Any notable difference in the interest rate can be the reason why a customer can think of such a switch over.

Source: IKIA Research

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