The software industry has resulted in employees taking home attractive pay packets. This, in turn, has boosted the realty market as young professionals look at it as an avenue of investment (editorial “The home loan trap?”, Nov. 19). Exploiting the situation, financial agencies offer home loans with a floating rate of interest.
Borrowers do not read the fine print and they end up in trouble. It is a pity that some bankers do not accept re-payment of a lump-sum towards a housing loan. There are cases in which a borrower forecloses the amount but is still charged a heavy interest.
S. Nallasivan,
Tirunelveli
The government thought that the public sector banks would supplement its efforts to meet the huge demand for housing. The RBI, therefore, directed them to ensure housing finance at lower interest rates. But the growth of realty has seen the entry of unscrupulous elements inducing unhealthy competition. People have misused this. Teaser loans may not be as serious as the sub-prime loans in the U.S. but it is true that the problem there was because of indiscriminate housing finance.
Karavadi Raghava Rao,
Vijayawada
Although a marketing gimmick, the teaser rates offered by banks for a home loan are beneficial and should continue. A debt trap can be avoided if the RBI ensures that banks assess the repayment capacity of borrowers based not on teaser rates but on equated monthly instalments payable after the teaser period.
Manohar Alembath,
Kannur
Borrowers are enticed with a lower interest rate in the initial years, but are subsequently charged with ‘floating' rates that are very high and beyond the repaying capacity of many. In many cases, borrowers are unaware of the implications and terms. When they default, they lose their property. Financing institutions suffer since taking action against lakhs of borrowers by auctioning their houses is a long, complicated process. The Finance Ministry, the RBI and the NHB should end teaser loans, lest our banks crash as some U.S. banks did due to housing loans.
Ramya Ravindran,
Cuddalore
