Banks Cannot Change Mortgage Interest Rates Without Borrowers’ Consent | Personal finance news
New Delhi: The Delhi Consumer Commission has ruled that banks cannot change mortgage interest rates without obtaining the consent of borrowers. He also called the automatic change in interest rates an “unfair trade practice”. Committee Judge Sangita Dhingra noted that banks were required to notify borrowers and seek their consent whenever mortgage interest rates were changed under the floating interest rate plan. Recalling a 2015 judgment of the Supreme Court, as well as a 2019 judgment of the National Consumer Forum, the committee did not dispute that in the event of a floating interest rate, loan interest continued to fluctuate in accordance with for approval by the Reserve Bank of India (RBI).
Additionally, by signing a loan agreement, a borrower would agree to these interest changes as well as changes in the loan repayment term. However, the commission maintained that an opportunity must be offered to the borrower before changing the floating interest rate.
What are the different interest rate options offered by banks to borrowers?
Usually, banks offer one of the following loan options: variable rate home loans and fixed rate home loans.
For a fixed rate loan, the interest rate is fixed either for the entire term of the loan or for a certain portion of the term of the loan. In the case of a pure fixed loan, the EMI that a borrower is owed to the bank remains constant. However, if a bank offers a loan that is only fixed for a certain period of the loan term, RBI says borrowers should try to get information from the bank if rates can be increased after the period (clause reset). Borrowers can also try to negotiate a lock-in which should include the rate you originally agreed to and the lock-in period, the central bank explains. The EMI of a variable rate loan changes with changes in market interest rates. If market rates go up, your repayment goes up. When rates go down, your contributions go down too.