Since banks are allowed to keep their base rates unchanged for two months, they have yet to pass on the full effect to customers. “So it’s important to lock in your mortgage rates before they rise further to take advantage of lower rates,” says Atul Mongafounder and CEO of Basic Home Loan in an exclusive interview with Bizz Buzz
What should a mortgage borrower do at this time, especially with rising interest rates?
Although the RBI’s decision to raise the repo rate was anticipated, the timing of the announcement came as a surprise to many borrowers. With this third hike this year, home loan EMIs may rise to weather the impact of the current economy and maintain stability. In effect, lenders attempt to offset the risk of rising interest rates by charging higher rates to new borrowers. This has resulted in higher mortgage rates, both for new borrowers and for those looking to refinance their existing home loans.
For those of you 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 find the best deal on a home loan. There are many lenders and each tries 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 making a decision.
Also, if you’re already approved for a loan, you might want to consider locking in your interest rate. This way, you’ll know exactly how much your monthly payments will be and won’t have to worry about rising rates. 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 occur. So what can be done to benefit from a lower interest rate?
Since banks are allowed to keep their base rates unchanged for two months, they have yet to pass on the full effect to customers. It is therefore important to lock in your mortgage rates before they increase 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 term: A longer loan term means lower monthly repayments, which can 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 result in a lower interest rate.
4. Improve your credit score: A good credit score tells lenders that you are a low-risk borrower, which 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 have to pay each month. This can help you budget better and can 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 getting a lower interest rate on your loan. Remember that it is always important to compare the rates and terms of different lenders before making a decision.
Is it the right time to move from a repo-linked rate to a fixed rate?
The debate over whether to move from a repo-linked rate to a fixed rate has been raging for some time now. There are pros and cons to both approaches, and it ultimately depends on your priorities. If you are looking for stability, 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 rate fluctuations.
On the other hand, repo rates are linked to a specific index, they are considered more volatile than fixed rates. So if you get a repo-linked rate, you might pay a lower or higher interest rate than a fixed rate. As long as you continue to make payments, you will eventually reach a point where you will be paying the same amount of money as you would with a fixed rate.
Of course, there is 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 at both options, you may find something that works well for you. If you’re not sure which option is right for you, it’s always a good idea to speak with a financial advisor.
What impact do you see on rising interest rates in the affordable housing segment?
When interest rates rise, it impacts everyone in the market, but it has a particularly harsh effect on the affordable housing segment. First, the cost of borrowing is rising, making it harder for developers to secure financing for new projects. And since most projects in the affordable housing segment are financed by debt, this can be a real problem. Second, customers are required to take out home loans at higher investment returns, resulting in higher EMIs.
How has the BASIC Home Loan business model evolved? And what role does technology play in it?
BASIC aims to create a hassle-free environment and make the home loan process faster and stress-free for customers.
We work on a ‘Phygital’ approach, in which we generate business through our website/agent network. At no additional cost, we ensure that every client’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 each successful disbursement. As a result, clients receive better products through digital comparison, faster disbursements through agent-led execution, and complete transparency of the lending process at their convenience.
All technology and product development at BASIC is done with one principle in mind that it should be “built for a purpose”. So every product we’ve built digitizes or automates home lending or improves customer convenience, or promotes sales efficiency and cost reduction.
How big is your current business and what are your growth forecasts for the next two years?
Since our inception, here is our growth – Our agent network was 900 across India at the end of 2020-21 and grew to 4,000 in FY22. The number of cities in FY21 was six and the number of cities so far is 20 and we are growing daily. The major city names are Delhi NCR, Mumbai, Bangalore, Pune, Ahmedabad, Indore, Bhopal and Jaipur. We disbursed home loans of Rs 1,000 crore in FY22, a 5x growth from the prior year.
What innovations is BASIC Home Loan working on?
We take care of all the legwork so clients can focus on finding the right lender. Our patented Product Eligibility Matrix (PEM) – (Customer-Bank/Product Matchmaking Engine) system matches customer and property data to the actual credit policies of our lending partners using superior matching algorithms, integration CIBIL and strong fraud prevention, resulting in an industry-leading conversion rate of 70 percent. We deploy all the latest technologies for digital customer onboarding (eKYC, vKYC) as well as document verifications through Digi Locker to prevent customer fraud while complying with all applicable regulations. We are rolling out a digital mortgage experience where everything from lead generation, application, sanction to disbursement can be processed through our app or from the website.