Customers who have taken home loans under the dual rate scheme are facing a peculiar problem. From April 1, once their rates shift from fixed to floating, their floating rate will be higher than the current floating rates, due to higher spreads.

HDFC Ltd is encouraging its borrowers to make use of the ‘conversion option' of switching over to the new floating rate. The regular conversion fee is 0.5 per cent of the outstanding amount and it is a one-time fee.

However, given that a huge chunk of its borrowers are facing this problem, the company may offer a lower conversion fee this time, said Ms Renu Karnad, Managing Director, HDFC.

“We have sent letters to our customers who had taken loans under the dual rate scheme, informing them that their rates will increase from April 1 because of the product,” she said.

Currently, HDFC's floating rates vary between 10.5 and 11 per cent, depending on the amount. For customers whose loans become floating from April 1, the rates could be in the 11.5-12 per cent range, due to higher spreads over the RPLR (retail prime lending rate).

The number of customers who have opted for the dual rate product could be a few thousands, Ms Karnad said.

“I don't think too many customers would want to shift to other lenders as our rates are comparable. Also, when they move to a new lender, they will have to pay processing fee and go through the appraisal all over again. So, it is more convenient for borrowers to stay with their original lenders,” she added.

ICICI Bank is also understood to be offering similar ‘switch fee' options on a regular basis. The fee could vary from customer-to-customer, depending on the amount.

> priyan@thehindu.co.in

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