The housing finance regulator (NHB) is trying to frame out rules to discourage direct selling agents, from facilitating loan takeover among mortgage companies.
This, although, would affect consumer’s freedom to transfer to another lender within a specified time, the NHB (National Housing Bank) is aiming to ensure that borrowers do not manipulate the system.
“We are watching the space of balance transfer, where lot of direct selling agents is involved and working on industry-wide data,” said Sriram Kalyanaraman, Managing Director of National Housing Bank. “We will look at whether any mis-selling is happening. We are looking for inputs from credit bureaus.” When the borrower takes decision to pre-pay a loan, the amount is deducted from the principal outstanding, which in turn reduces EMIs or the remaining tenure of the loan.
After the pre-payment charges were abolished, customers started switching to low interest rates, moving from one financial institution to other. Banks earlier levied a prepayment charge of 2-3 percent of the outstanding loan amount, if one gets ready to prepay.
However, in 2012, the RBI and NHB asked banks and housing finance companies not to levy prepayment charges on home loans. “The percentage of prepayment of home loans has been on a downward trajectory for the past two years,” said Ashwini Kumar Hooda, Deputy Managing Director of Indiabulls Housing Finance. “In FY16, we noticed pre-payment of 1.24 percent per month of our home loans, which further came down to 0.73 percent per month in FY17.”