Previously housing finance companies were allowed to charge as much as 4% of the pending amount to prepay their loan. This step by NHB will provide a sigh of relief to lakhs of borrowers who pay from their kitty to prepay the loan.
This will also provide borrowers an option to switch their HFC for better interest rate as no penalty would be there on their existing loan.
The new guidelines will be applicable for both old and new borrowers. So, now those who are paying high EMIs due to prevailing high interest rates, can easily move to lower interest rate home loan scheme once and when rates cool down.
It is very important for the borrowers to know that the new rule is only applicable for the borrowers who have taken home loans from housing finance companies not banks as it has been implemented by NHB. If the Reserve Bank of India (RBI) takes any such move, then same will be applicable for the borrowers who have taken loan from the banks.
The move is pinching banks as they might lose their market share because with this new guidelines by NHB, home loan borrowers will prefer taking loans from housing finance companies.
To attract new borrowers with low interest rates, housing finance companies used to charge higher interest rates to old borrowers. So, with this move, HFCs may lose their old customers unless they come out with some benefits for them as well.
"Charging of higher interest rate to the old customers against the new customers puts old customers at a great disadvantage, besides being a discriminatory practice. For the growth of a healthy and sound housing finance system, it is considered necessary that pricing of the products by the lending institutions are transparent, non-discriminatory and objective," NHB said.