Teaser Home loans are those home loans that would be initally ( for first 2 or 3 years ) offered at a low rate of interest and then the rate of interest would be increased to the prevailing market rate, which is definitely higher.
The problem with Teaser Home loan was that , the initial low rate of interest kind of gave the borrower a false sense of confidence that , they can borrow more and also that they can repay the loan without much problem . But it would be only after the initial teaser period is over that , the borrower realises that , he actually would have to shell out much more, as Interest rates are from then on ( may be for next 12 - 18 years ) at a much higher rate .
What this does is , there are higher risk of borrower defaulting on his payments as he start feeling he does not have the repayment capacity at the higher rate of interest , thus making teaser loans a high risk lending for the banks .
But despite this banks had continued with teaser rates , as they wanted to increase their loan disbursements . But now with RBI stepping in and increasing teaser rates loans risk weightage , banks have to keep aside a bigger amount of money , for every teaser loan disbursed , thus making it less attarctive for bank to continue with teaser rates home loans.
This is welcome move from RBI .
Image : FreeDigitalPhotos.net,Photographer: renjith krishnan
No comments:
Post a Comment