The National Housing Bank (NHB) is preparing a mechanism under which it has plans to buy housing loans from banks and housing finance companies (HFCs) and in turn it will provide liquidity and free up capital to these lenders. On the successfulness of this plan the housing finance market will be able to breathe easy as far as liquidity is concerned. NHB will be providing securities on the loan portfolios and sell the papers to institutional investors like banks and insurance companies.
In an interview to ET NHB executive director RV Verma said this is the first time NHB has planned to start such scheme. He said, “This is a new initiative which will provide liquidity to lenders and free up capital. This will ultimately channel more resources to the housing finance sector. This will also ease pressure on home loan interest rates.”
He explained the working of the structure. NHB will be holding purchased assets in its balance sheet for advance securitization. In this process, the portfolios will get more tested with NHB. It means NHB will work as a warehouse of mortgage assets need to be securitized and then will be sold to investors without diluting the standard of the assets.
On Monday a meeting was held between NHB brass and the lender in which the decision was taken to develop this new liquidity window. NHB will be providing this facility in parallel with the usual refinance window.
As indicated by preliminary discussions, the apex housing bank will be buying only the standard assets which are having low risk weight age. Loans which are less than or equal to Rs 30 lakh will be eligible for this arrangement. “We would like to buy loans which have minimum seasoning of at least six months,” Mr Verma said.
After the amendment in Securities & Contracts Regulation Act securitized instruments can be traded and this has given an added flexibility to the securitized market. “The seasoning of assets and trade ability will help fetch a good price for the securitized assets,” Mr Verma said, further adding that this whole exercise of securitizing will in turn help NHB continue funding over and above the exposure limit to individual entities.
Tuesday, July 22, 2008
Monday, July 14, 2008
Banks hike home loan rates HDFC, ICICI hike by 75 bps
Inflation has already stretched everybody’s household budget. Now the banks are hiking interest rates on home loan which is going to further strain the budget as they have to reduce their spending to pull out more for EMI.
HDFC home loan market leader announced an increase of 50 basis points hike in interest rate for all its existing borrowers with floating rate loans. But for the new borrowers the increase will be around 75 basis points on floating as well as fixed rate loans.
After this increase the new customers will have to pay Rs 1,033 for every Rs 1 lakh as EMI on a 20 year loan. While for the existing floating rate customers EMI will increase by Rs 34 for every Rs 1 lakh loan with an outstanding tenure of 20 years.
Therefore after the revised structure the floating rate for new borrowers will be 11% and fixed rate 14%. The same level was last seen in the mid 90s. The hike in rates will be effective from July 1.
Along with HDFC the country’s second – largest bank, ICICI also announced a 75 basis points hike in the fixed as well as floating home loan interest. After this hike there will be 14.75% increase in the fixed loan interest perhaps the costliest in the sector.
Country’s largest public sector bank State Bank of India (SBI) will also be raising interest rates on home loans and auto loans by 50 bps on all linked to prime lending rates (PLR). SBI has increased PLR from 12.25% to 12.75% last week due to the increase in short-term lending rate to banks and the mandatory cash deposits that banks need to keep with the apex bank (CRR) by 50 bps each by the Reserve Bank of India. Punjab National Bank has also increased its PLR by 13%.
After the increase in PLR by the banks the households are now left with higher returns on deposits as their support. HDFC bank has hiked interest on deposits by 50bps while ICICI bank has increased by 50 to 100 bps more to new deposits and renewals.
In February HDFC bank had lowered its PLR by a quarter points. On the other hand the two public sector banks Canara Bank and Bank of India at present has decided not to hike home loan and auto loan rates even though they have increased interest rates for other categories of borrowers by 50 bps to 13.25%. On a floating rate basis, Bank of India is offering home loans in the group of 9.25-10% and Canara Bank is charging 10-10.75%.
Allahabad Bank and Dena Bank the state owned banks have also taken decision to raise PLRs by 50 bps to 13.5%. Canara Bank, Allahabad Bank and Dena Bank have increased their deposits by 25 to 75 basis points, whereas Bank of India is yet to decided on the same.
HDFC home loan market leader announced an increase of 50 basis points hike in interest rate for all its existing borrowers with floating rate loans. But for the new borrowers the increase will be around 75 basis points on floating as well as fixed rate loans.
After this increase the new customers will have to pay Rs 1,033 for every Rs 1 lakh as EMI on a 20 year loan. While for the existing floating rate customers EMI will increase by Rs 34 for every Rs 1 lakh loan with an outstanding tenure of 20 years.
Therefore after the revised structure the floating rate for new borrowers will be 11% and fixed rate 14%. The same level was last seen in the mid 90s. The hike in rates will be effective from July 1.
Along with HDFC the country’s second – largest bank, ICICI also announced a 75 basis points hike in the fixed as well as floating home loan interest. After this hike there will be 14.75% increase in the fixed loan interest perhaps the costliest in the sector.
Country’s largest public sector bank State Bank of India (SBI) will also be raising interest rates on home loans and auto loans by 50 bps on all linked to prime lending rates (PLR). SBI has increased PLR from 12.25% to 12.75% last week due to the increase in short-term lending rate to banks and the mandatory cash deposits that banks need to keep with the apex bank (CRR) by 50 bps each by the Reserve Bank of India. Punjab National Bank has also increased its PLR by 13%.
After the increase in PLR by the banks the households are now left with higher returns on deposits as their support. HDFC bank has hiked interest on deposits by 50bps while ICICI bank has increased by 50 to 100 bps more to new deposits and renewals.
In February HDFC bank had lowered its PLR by a quarter points. On the other hand the two public sector banks Canara Bank and Bank of India at present has decided not to hike home loan and auto loan rates even though they have increased interest rates for other categories of borrowers by 50 bps to 13.25%. On a floating rate basis, Bank of India is offering home loans in the group of 9.25-10% and Canara Bank is charging 10-10.75%.
Allahabad Bank and Dena Bank the state owned banks have also taken decision to raise PLRs by 50 bps to 13.5%. Canara Bank, Allahabad Bank and Dena Bank have increased their deposits by 25 to 75 basis points, whereas Bank of India is yet to decided on the same.
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