Axis Bank is the first bank to come up with such scheme, mostly banks offer in combination of fixed and floating rate loans or only floating rate loans.
Under the scheme, the bank will charge 11.75% interest rate for a period of 20 years, exactly 150 basis point higher than its prevailing base rate of 10%.
If the property value is under Rs 20 lakh, then bank will provide upto 85% loan to value (LTV) and 80% LTV in case if the property value is above Rs 20 lakh.
“Under the scheme, the bank will offer home loan to eligible buyers up to 85 per cent of loan-to-value for debt up to 20 lakh and 80 per cent loan-to-value for borrowings above Rs. 20 lakh, with a pre-payment charge of 2 per cent of the outstanding amount,” company's press release said.
The scheme will attract a penalty of 2% on outstanding amount in case of prepayment.
The scheme also includes scheme migration facility, if in case borrower want to switch from fixed rate loan to floating rate loan, but at the cost of 2%.
At present, the bank's floating interest rate is around 10.75%, so in this case, borrower will have to pay 1% over the floating interest rate.
“Customers today are facing uncertainty about EMIs on their home loans due to interest rate increases in the market. At Axis Bank, we want to offer the customer certainty about the EMI they need to pay for the entire life of the loan,” RK Bammi, executive director-retail banking, Axis Bank, said.
View: RBI has raised key policy rates by 12 consecutive times since March 2010, with this interest rates in India have already reached at the peak. Rates may come down soon, so it wouldn't be wise to lock into this scheme as of now, as the borrower may end up paying high interest rate for 20 years.