Homeowners struggle to keep up with rate hike

Over the last four years interest rates on home loans have been steadily increasing and while income earners in all age groups have had to pay a steep price for their home investments, it is people in their 40's who have been the hardest hit.
From 7 per cent to 12 per cent - that is the leap in Rama Kirpal's interest rate on her home loan in just 6 years. “We started with an EMI of Rs 15,000 but now I pay almost Rs 21,000 every month. Had we taken the loan when we were young or newly married then our EMIs could have spread over longer period. I have taken an education loan for my son who studies abroad and now we don’t know how to manage,” said Rama Kirpal, a school teacher.
Increasing interest rates mostly affect such borrowers who take home loans in their forties because banks refuse to relax the tenure for such customers leaving them with no option but to pay higher EMIs with every interest rate increase.
Over the last 10 years, home buyers in Delhi have become much younger. The average age has fallen from 45 to 32.
Banks allow these younger clients to extend the duration of their loan for no extra cost but older clients who are closer to retirement don't get the same option.
So Rama has transfered her loan several times from one bank to another. But banks charge a hefty penalty when you settle with them ahead of schedule with the help of a new bank. “We ended up paying 2.25 per cent as pre payment charges, which translated into Rs 30,000 for LIC and almost the same amount when we shifted from ICICI bank to SBI,” said Kirpal.
So as interest loans keep rising, what is an older home owner to do? Experts say instead of transferring loans to new banks, use savings if possible to make payments on time.
“Whatever extra amount one has saved and kept as fixed deposit or in the capital market should be used to return the loan,” said Malay Ray, Business Head, DCM Services.
Thus the interest rates hike will cost Kirpal a little more every month than she had originally bargained for