Rising interest rates on home loans is bad news for any borrower, but it is particularly bad for those who got loans at floating rates in late 2004 or early 2005. Such borrowers are effectively paying between 0.5 and 2.0 percentage points higher than new borrowers.Article at The Times of India.(bold of course mine)
Why is that the case? Read on. Both the main lenders in the home loan segment, ICICI Bank and HDFC Ltd, which control almost 50% of the market, have increased rates for existing borrowers around half a dozen times since November 2004. Every time their benchmark lending rate goes up, the increase is passed on to old customers. To lure new customers, however, they are willing to settle for a lower increase in the rate for fresh borrowers, by increasing the discount to the benchmark rate.
As one banker says, “an old customer is like your wife, a new one is like your girlfriend.”
I have been a wife of ICICI since late 2004. Well, the new laws give brutalized wives enough ways to fight back. I just wonder if I have any.
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