thebestmortgagerate.co.uk » 2007

Search

Latest News

Blogroll

Theme by Seobilgi Sponsored Lazerli Epilasyon www.lazerepilasyon.de and Abant Kapadokya pansiyon - Pamukkale pansiyon - şile ağva - ağva rehberi - ağva otel - lazer epilasyon - saç modelleri - antivirüs programı - paris hotels - gitar www.gitaral.com

Student borrowers tired of being gamed by the system

The college class of 2007 is basking in the glow of graduation. But in the coming months, more than half of the new graduates will face a harsh reality: the need to begin repaying their student loans.

Like many of them, I have a lot of student-loan debt. And like many, I write a check each month to Sallie Mae, the biggest student loan company in the country. Recently, Sallie Mae sent me a very official-looking e-mail noting that I might be eligible for a lower interest rate. But I needed to act fast, said the e-mail, because “Congress has recently proposed legislation that would significantly increase costs to lenders,” a move that will “likely force lenders to reduce or eliminate benefits offered to borrowers.”

So Congress is planning to increase the cost of loans, right? No. The proposed legislation, which was recently approved by the Senate Education Committee with bipartisan support, would actually help student borrowers. It promises to reduce the huge profits that the government guarantees lenders in the federal loan program and pass along the savings to students in the form of interest-rate cuts. In this e-mail, Sallie Mae, which is so profitable that it was sold for $25 billion, is threatening to stick students with the bill for a law designed to help students.

This e-mail provides a window into the world of student borrowers, who in recent years have been willfully ignored by lenders and — in many cases — their own university financial aid offices.

Posted in Uncategorized, student loan | Comments(0) June 2007

Student Loan Industry Struggles Amid Controversy

A bill before Congress would cut billions in federal subsidies for the student loan industry and increase the amount of money available for needy students – with funding coming from the pockets of lenders. The industry is under assault after reports of unethical financial relationships between universities and private lenders.

Loan industry defenders say the bill would favor lenders who don’t have students’ best interests in mind. Student advocates say money that now goes to lenders should be re-routed toward students.

“What Congress is talking about doing is taking these lenders subsidies and shifting it all to increase grants and cheaper loans so they’ll be guaranteed to go to students,” said Michael Dannenberg of the New America Foundation, a Washington think tank.

The federal government pays lenders big subsidies to loan money to students at below-market rates. Originally, in the 1960s, that was meant to ensure that lenders would loan money to kids with no credit history.

Robert Shireman of the Project on Student Debt said that isn’t necessary anymore.

“Certainly over the past 10 to 20 years, the programs have matured to the point where getting capital into the federal student loan program has not been a problem,” Shireman said.

Congress appears to agree. Lawmakers have voted in committee to cut billions in subsidies to lenders. Lenders would still get a guaranteed rate of return, and they’d still have a nearly complete government guarantee that protects them against default. But they would make a lot less on those loans.

President Bush supports cutting the subsidy rates. But the industry is trying to fight the perception that it rakes in exorbitant profits.

“No abnormal profits are being made in student loans,” said Kevin Bruns, of the industry group America’s Student Loan Providers. He said lower profits will drive out some companies.

Many lenders now offer discounted interest rates in exchange for electronic payments or on-time payments. Some will also knock off 2 percent or 3 percent of the principal on graduation or pay upfront fees for the borrower.

Bruns said that while the cut in subsidies won’t affect student payments directly, students will pay more if frustrated lenders cut those discounts.

But those discounts are often a ruse, bound up so tight in red tape that they rarely materialize, Dannenberg said.

He said the student loan industry is very healthy and doesn’t need the government’s support, listing for example the multibillion-dollar buyout of Sallie Mae, the nation’s largest student-loan company, by a group of private investors.

Dannenberg wants to go further in cutting subsidies. He supports the idea of having a loan auction, which would undergo a test under the Senate bill.

“One way for an auction to work is that the banks would have to bid against one another in order to secure this sure source of profit that taxpayers create,” Dannenberg said.

Bruns said the auction idea would backfire by giving the upper hand to lenders who don’t have students’ best interest in mind.

He said a less reliable lender who is not as interested in investing in service could win the auction by low-balling to get the market share.

“An auction creates that problem where everything is based on price,” Bruns said.

Some Republicans share those concerns and oppose cutting subsidies too deeply. But as news reports roll in about conflicts of interest between colleges and lenders, sympathy for this industry is at low ebb.

Posted in student loan | Comments(0) June 2007

Lenders push for home loan prepayment

The hike in home loan rates, banks are encouraging some borrowers to prepay a part of their loans or increase their monthly installments in order to help them meet their liabilities by the time they retire. Sources said that some banks like ICICI Bank and HDFC have made this proposal to middle-aged borrowers whose repayment term now extends beyond their retirement age following the increase in rates. Traditionally, borrowers who have chosen floating rate loans end up paying the same monthly installment as the practice is to vary the tenure of the loan.
Since January 2007, ICICI Bank has raised floating home loan rates by 250 basis points and HDFC have increased it by 175 bps. As a result, the tenor of the loan has increased substantially. Currently, ICICI Bank charges 12% and HDFC charges 11.75% for floating loans.
While most borrowers take loan for 15 years or 20 years, a further increase in the tenor of the loan will mean that the some borrowers (in their late thirties) would have to pay monthly installments for few years beyond the retirement age. During the initial hike in rates, banks had raised the tenor of the loan. However, in the subsequent hikes, ICICI Bank has sent a communique to borrower to repay a part of loan or increase the monthly payment. “The move will enable borrowers to reschedule the loan in manner that he does not have any liabilities post-retirement,” said a banker. Meanwhile, State Bank of India, the country’s largest is yet to frame a policy for borrowers whose loans would exceed their retirement age. “SBI is in the process of framing a policy on this, but the interest rate cycle may change at least a couple of times in the next 10 years,” said a senior SBI official.

Posted in Uncategorized, home equity loan, home loan, loan, loan calculator, home equity loan rate, loan rate, home equity loan comparison, bank loan | Comments(1) June 2007

Canara Bank cuts home loan interest rates & Canara Bank launches new retail loan scheme

Canara Bank has reduced the floating and fixed home loan interest rates, as also rates of auto loans and other personal loan products, with effect from Wednesday.The new floating rates on home loans up to and inclusive of five years are now down to 7.75 per cent from 8.25 per cent irrespective of the amount of loan, while rates for loans above five year are down to 8.75 per cent from 9 per cent up to a loan size of Rs 10 lakh (1 million), the bank said in a release.The rates of loans (above five-year) exceeding Rs 10 lakh, are down to 9 per cent from 9.25 per cent, irrespective of the tenure.Fixed rates applicable for the three categories are now lowered to 8.25 per cent, 9.50 per cent and 9.75 per cent from 8.75, 9.75 and 10 per cent, respectively, it said.

The minimum equated monthly installment for a 20-year floating rate home loan has now come down to Rs 880.Rates for its Canmobile loan scheme for cars and two-wheelers have been reduced by 0.5 per cent, the release said. Up to a loan size of Rs 300,000, the bank will charge an interest rate of 11.5 per cent, while for loans above Rs 300,000 and up to Rs 500,000 the rate will be 12 per cent. For loans above Rs 500,000, the rate is fixed at 12.5 per cent, it added. Canara Bank has launched a new retail loan scheme called “Canara Guide” to finance Tax Return Preparers (TRPs) selected by the Union Finance Ministry. “It is a novel scheme introduced to provide self-employment opportunities to unemployed or partially employed graduates all over the country,” a Canara Bank release said.
Loan amount up to Rs 60,000 is sanctioned at a rate of interest of one per cent less than the BPLR of the bank, presently 12.25 per cent, with repayment period up to 60 months. A margin of 15 per cent is to be brought in by the applicants. In order to provide adequate time for TRPs to generate enough income, initial repayment holiday of six months is permitted. Repayment can be made in step-up EMIs also, it said.

Posted in home equity loan, home loan, loan, loan calculator, home equity loan rate, home improvement loan, loan rate, home equity loan comparison, bank loan, estate finance finance investment investment | Comments(0) June 2007

OBC’s mid-corp branch opened

Oriental Bank of Commerce (OBC) launched here on Friday a “mid corporate branch'’ which will serve customers (including non-corporates) seeking “open term loans'’ from the bank.
The branch, located on Kilpauk Garden Road, will be exclusively devoted to sanction of open term loans (which entail a standby credit apart from sanctioned loan limits) for a minimum of Rs. 10 lakh to a maximum of Rs. 5 crore to existing and potential customers in manufacturing and services sectors. Construction contractors can avail themselves of 80 to 85 per cent of the capital cost of equipment to be purchased as term loan, besides working capital limits.
Corporates with a net worth of at least Rs 25 crore and uninterrupted profits for the last three years can get loans of a tenure of up to 35 months for substitution of high-cost debt, augmenting long term resources and for general purposes including margin money for acquisition of long term assets. Mr. Prithviraj (who is scheduled to demit office shortly) said that since the merger of Global Trust Bank with OBC in August 2004, the bank’s performance had further improved, with net NPAs coming down to 0.4 per cent, and capital adequacy going up to more than 13 per cent and return on assets to 1.4 per cent. The bank made up its shortfall in agricultural lending by making interest-bearing deposits of Rs. 286 crore with the RIDF of NABARD.

Posted in Uncategorized, loan, loan calculator, loan rate, bank loan | Comments(0) June 2007

Citizens Bank named in student loan report

Citizens Bank was named as one of the federal student loan lenders that provided improper benefits to school officials for preferential treatment in a report released by a US Senate committe today.Citizens is part of Citizens Financial Group Inc. of Providence, which is owned by The Royal Bank of Scotland Group plc.The committee issuing the report was the US Senate Health, Education, Labor, and Pensions Committee.The report, commissioned by Senator Edward M. Kennedy, Democrat of Massachusetts, the committee chairman, found that some lenders provided compensation to schools and played a generous host to school officials in order to gain more business.

Citizens Bank and four other lenders are specifically mentioned in the report for spending large sums to fly in school officials to advisory board meetings at hotels and resorts.Citizens Bank, according to the report, paid for expensive restaurant meals, golf outings, and trips to the spa. For example, school officials attended a Philadelphia Phillies baseball game in a luxury box in fall, 2005 without paying for the $2,935 tab.

Posted in student loan, loan, student loan consolidation, federal loan consolidation, loan rate, federal student loan, federal student loan consolidation, bank loan | Comments(0) June 2007

Banks could face more home loan defaults

The National Housing Bank (NHB) is keeping a close watch on the possible defaults that could take place due to rise in equated monthly instalments (EMIs) on home loan borrowers. Though there is not much concern on housing finance companies, but in the case of housing loans provided by banks. Industry estimates suggest that about 85-90% of home loan borrowers have taken loans on a floating-rate basis.

Lenders like Housing Development Finance Corporation (HDFC), ICICI Bank and State Bank of India (SBI) also have about 90% of their existing home loan customers on the floating-rate basis. Last year, housing finance regulator NHB released a study projecting that 93.5% of the home loans borrowers had used the floating-rate mechanism. “We are thinking that people who own single house for accommodation purpose should not feel the pinch of the rise in EMIs. Rather the burden should be borne by people who own two or more houses, most of the time, which is for speculation purpose of selling when property prices appreciate,” says RV Verma, executive director, National Housing Bank. He said that the regulator is currently studying the data to assess the impact on the hike in EMIs on defaults. “We have not come up with any number yet, but we are studying,” said Mr Verma.

Similarly, the government, on its part, has been keen that the impact of high interest rates should somehow be softened on small-and-medium borrowers. Union finance minister P Chidambaram had asked chief executives of public sector banks to protect the interests of borrowers in the Rs 8-10-lakh category to the extent possible. The last fiscal witnessed a steep surge in interest rates. For example, in case of HDFC, floating rates for home loans had gone up to 11.25% from 8.5% in the beginning of FY07. Officials say that various housing finance companies say that in case a borrower is well below the retirement age, the loan period gets extended while the EMI remains constant. However, customers may well opt for a higher EMI without changing the loan tenure. A customer may also prepay part of the loan to keep the EMI and tenure unchanged. However, there is an increasing fear of defaults in case the tenors are extended for customers. Some of the banks are reluctant to increase the repayment period beyond 20 years. Every 0.5 percentage point rise in home loan rates translates into a higher EMI of around Rs 32 per one lakh for a 20-year loan. Likewise, customers would need to pay an additional Rs 30 per one lakh for a 15-year loan, Rs 28 per lakh for a 10-year loan and Rs 26 per lakh for a 5-year loan.

Posted in Uncategorized, home equity loan, home loan, loan, loan calculator, home equity loan rate, loan rate, fixed rate home equity loan, bank loan | Comments(0) June 2007

Banks won’t let you shuffle home loan

Banks are inserting new clauses in home loan agreements to protect their books amid hardening interest rates and rising defaults. These loan conditions will make life a little more difficult for borrowers who are struggling to pay higher EMIs. Some banks have stopped giving fixed rate loans beyond a few years, a few have set an early reset clause whils others are insisting on a lock-in period during which a switch from fixed to floating rates (and the other way round) isn’t possible. Borrowers who have taken home loans on floating rate have already seen it increase by three to four percentage points in the past 18 months to around 11.5-12%. With rising rates, new borrowers are looking at taking fixed rate loans, while the existing borrowers are thinking of a switch from floating to fixed rate loans despite a higher rate.

However, banks are designing loan documents to discourage this. A fixed rate loan is aimed at protecting the borrower against the risk of rising interest rates. But a reset clause will enable banks to charge a higher rate at the time of reset (if interest rates moves up). Government-owned IDBI Bank and Union Bank do not provide fixed rate loans above five years. ”The fixed and floating rate concept is slowly losing its relevance. Over the past two occasions, we have not raised interest rates for existing floating rate customers, which means loans have been at a fixed rate of interest for them even as interest rates have moved up in the system,” said MV Nair, Union Bank of India chairman.

A number of other banks are offering a long-tenure fixed-rate option, but with a reset clause. Last month, Bank of India reduced its reset option on fixed rate home loans from 10 years to five years. Justifying the move to reduce the reset clause, D Krishnamurthy, general manager in charge of retail at Bank of India, said, “In such a volatile interest rate scenario it is not advisable for the customer and the bank to go for a fixed rate for a long time.” The country’s largest bank — State Bank of India — with a home loan portfolio of almost Rs 38,000 crore, which is 13% of its total credit, has a reset clause at the end of two years.

Canara Bank and Punjab National Bank have a reset option on fixed rate home loan at the end of five years; it is three years in the case of Allahabad bank. PNB has recently inserted a lock-in clause in loan documents, wherein a customer cannot switch from floating to fixed and fixed to floating within three years of taking a home loan. “The move follows a requests from a number of big-ticket borrowers who were looking a switching loans from floating to fixed rate due to rise in interest rate.

Posted in Uncategorized, home loan, loan, loan calculator, home equity loan rate, loan officer | Comments(1) June 2007

Big PSBs may hike rates on second home loans

Second home loans may cost more as some large public sector banks are contemplating a higher interest rate but home loans below Rs 20 lakh are likely to get cheaper, providing relief to the lower and middle-classes. Taking a cue from Union Bank of India which has reduced its interest rate on home loans below Rs 20-lakh, a few large public sector banks are understood to be considering following suit. Smaller banks, however, appear unlikely to do so. Similarly, a higher rate of interest for second home loans also appears on the cards, but here again, it is the bigger public sector banks which are believed to be considering such a move. “There’s been some thinking on these lines,” a top State Bank of India (SBI) official told PTI here. “However, no decision has been taken as yet. We will decide within the next 10 days.”

Presently, SBI charges the same rate for both first and second time home loans. ICICI, a big-time home loans lender, has already indicated that it may consider a higher rate for second-time loans to discourage speculation in the real estate sector. A Bank of Baroda official said that reducing rates on loans below Rs 20-lakh would depend upon factors like cost of funds for the bank. “We are studying the matter,” he said.

The official said that charging a higher interest rate for second home loans was also “under discussion” but a decision either way will be taken only by end-May or early- June. Bank of India, another big public sector lender, said that it had not increased its home loan rates when other banks did so in the past and “hence, there may not be a need to reduce them. Our rates are very competitive,” its Executive Director K R Kamath said. On second home loans, Kamath said that “as of now, we are not contemplating any increase in rates, but going forward, we may look at it.” Smaller public sector banks such as Central Bank, Dena Bank and the south-based Indian Bank which cater to small ticket loans said that they may have no need to raise rates on second home loans since they do not receive many such applications.

On reducing rates for loans below Rs 20-lakh, many of them said that with their rates already very competitive, a reduction could be contemplated only after taking a considered view of all factors. Dena Bank’s Executive Director, U S Kohli, said that since the bank had not revised upwards its rates the last time, “there is no question of reducing rates below Rs 20-lakh.” Second home loans too were not of much concern to smaller banks since the majority of their loans were in the range of Rs 5-10-lakh. “90 per cent of our loans are in the Rs 8-10-lakh range,” Bank of Maharashtra’s Chairman and Managing Director M D Mallya said. (
Mallya, however, said that going forward the bank may consider reducing its rates below Rs 20-lakh. “We may review the issue at our next asset-liability committee (ALCO) meet,” he said.
Central Bank of India said that its rates were lower as compared to its peers. “Our rates are still lower than our competitors,” its Executive Director K Subbaraman said. Most of the bank’s customers were first-time loanees and second-time purchasers were “very few with the average size of our loans in the range of Rs 5-10-lakh.” The bank has no differential pricing as of now.
Indian Bank’s Chairman, K C Chakrabarty, who described his bank as a “common man’s bank” said that nearly 99 per cent of his customers were first-time home buyers. “You tell me how many of my customers have the muscle to buy a second home,” he asked.

Posted in Uncategorized, home equity loan, home loan, loan, loan calculator, home equity loan rate, loan rate, home equity loan comparison | Comments(0) June 2007

RBI reduces risk weight on housing loans

Reserve Bank of India (RBI) notified the reduction in risk weight on hosing loans for up to Rs 20 lakh from 75 per cent to 50 per cent. “It has been decided to reduce the risk weight in respect of housing loans of up to Rs 20 lakh to individuals against the mortgage of residential housing properties from 75 per cent to 50 per cent,” RBI said in a notification issued. The notification follows RBI’s decision to this effect in its credit policy last month.

The central bank also reduced the risk weight for banks’ investment in mortgage backed securities, issued by the housing finance companies, to 50 per cent from the existing 75 per cent. RBI, however, said it would review the risk weights after one year keeping in view the default experience and other relevant factors.

Posted in Uncategorized, home equity loan, home loan, loan, loan calculator, fast loan, home equity loan rate, loan rate, home equity loan comparison, bank loan | Comments(1) June 2007

« Previous Entries

Search

Categories

Latest News

Blogroll