It's time to Lock in your home loan rates before they rise further

Since banks are allowed to keep their base rates unchanged for two months, they have not yet passed on the full effect to customers. "It is therefore important to lock in your home loan rates before they rise further to take advantage of lower rates," says Atul Monga, founder and chief executive of Basic Home Loan in an exclusive interview with Bizz Buzz

What should a home loan borrower do at this point of time, especially with rising interest rates?

Although the RBI's move to raise the repo rate had been anticipated, the timing of the announcement surprised many borrowers. With this third hike this year, home loan EMIs may increase to address the impact of the current economy and maintain stability. This is because lenders are trying to offset the risk of rising interest rates by charging higher rates to new borrowers. This has led to an increase in mortgage rates, both for new borrowers and for those who are looking to refinance their existing home loans.

For those of you who are looking to take out a home loan, now is a good time to start researching your options. With interest rates rising, it's more important than ever to shop around for the best deal on a home loan. There are a lot of lenders out there and each one is trying to attract new customers with low rates and good terms. So, don't just go with the first lender you talk to. Shop around and compare offers from several different lenders before you make a decision.

Also, if you're already approved for a loan, you may want to consider locking in your interest rate. This way, you'll know exactly how much your monthly payments will be, and you won't have to worry about rates going up. Whatever you do, don't make any rash decisions. Take your time, do your research, and you'll be sure to find the best home loan for your needs.

As we have two months for the impact of the rate hike to happen. So, what can be done to avail lower interest rate?

Since banks are allowed to keep their base rates unchanged for two months, they have not yet passed on the full effect to customers. It is therefore important to lock in your home loan rates before they rise further to take advantage of lower rates. There are a few things you can do to increase your chances of getting a lower interest rate on your loan:

1. Shop around: Don't just go with the first lender you come across. Compare interest rates and other terms and conditions from a few different lenders before making a decision.

2. Consider a longer loan tenure: A longer loan tenure means lower monthly repayments, which may make it easier to qualify for a lower interest rate.

3. Make a higher down payment: A higher down payment on your loan will also lead to a lower interest rate.

4. Improve your credit score: A good credit score indicates to lenders that you're a low-risk borrower, and this could lead to a lower interest rate on your loan.

5. Consider a fixed interest rate: With a fixed interest rate, you'll know exactly how much you need to pay each month. This can help you budget better and may make it easier to qualify for a lower overall interest rate.

Doing any or all of the above may give you a better chance of securing a lower interest rate on your loan. Remember, it's always important to compare rates and terms from different lenders before making a decision.

Is it the right time to switch from a repo-linked rate to a fixed one?

The debate around whether to switch from a repo-linked rate to a fixed one has been raging for some time now. There are pros and cons to both approaches, and it ultimately comes down to what your priorities are. If you're looking for stability, then a fixed rate may be the best option for you. With a fixed rate, you'll know exactly how much interest you'll be paying, and you won't have to worry about fluctuating rates.

On the other hand, repo rates are linked to a specific index, they are considered to be more volatile than fixed rates. So, if you get a repo-linked rate, you might pay a lower interest rate or higher interest rate than a fixed rate. As long as you continue making payments, you'll eventually reach a point where you'll be paying the same amount of money as you would with a fixed rate.

Of course, there's no right or wrong answer here. It all comes down to what's important to you. Both types offer different advantages and disadvantages. By looking into both options, you can find something that works well for you. If you're not sure which option is best for you, it's always a good idea to speak to a financial advisor.

What impact do you see on the affordable housing segment's rising interest rate?

When interest rates go up, it impacts everyone in the market, but it has a particularly harsh effect on the affordable housing segment. First of all, the cost of borrowing money goes up, which makes it tougher for developers to get financing for new projects. And since most of the projects in the affordable housing segment are financed through debt, this can be a real issue. Secondly, customers are required to take out home loans at higher ROIs, which lead to higher EMIs.

How has the business model of BASIC Home Loan evolved? And what role does technology play in it?

BASIC aims to make a hassle-free environment and make the home loan process faster and stress-free for the customers.

We work on a 'Phygital' approach, whereby we generate business through our website/agent network. At no additional charge, we ensure that each customer's needs are handled from start to finish by our trained agents. Everything from documentation to disbursement is handled by our advisor, who receives a commission on every successful disbursement. As a result, customers receive better products through digital comparison, faster disbursements through agent-led fulfillment, and complete transparency of the loan process at their convenience.

All technology and product development at BASIC is done with a single principle in mind that it should be 'built for purpose.' So, all the products which we have built either digitize or automate home loans or improve customer convenience, or promote sales efficiency and cost reduction.

What is the size of your current business and what is your growth expectation in the next couple of years?

Since our inception, here is our growth- Our agent network was 900 across India by the end of 2020-21 and grew to 4,000 by FY22. The number of cities in FY21 was six and the number of towns till now is 20 and we are expanding daily. Major cities' names are Delhi NCR, Mumbai, Bangalore, Pune, Ahmedabad, Indore, Bhopal, and Jaipur. We disbursed Rs 1,000 crore home loans in FY22, which is a 5x growth from the previous fiscal year.

What innovations is BASIC Home loan working on?

We take care of all the legwork so that customers can focus on finding the right lender. Our patented system Product Eligibility Matrix (PEM) - (Customer-Bank/Product Matchmaking Engine) matches client and property data to our lending partners' real credit policies using superior matchmaking algorithms, CIBIL integration, and strong fraud prevention, resulting in an industry-leading conversion rate of 70 per cent. We deploy all the latest technologies for the digital onboarding of customers (eKYC, vKYC) along with document verifications via Digi Locker to avert any customer fraud while complying with all current regulations. We deploy a digital mortgage experience where from lead generation, application, sanction to disbursement everything can be processed through our app or from the website.