COVID impact: Banks in no hurry to open their vaults to home loan seekers

COVID impact: Banks in no hurry to open their vaults to home loan seekers

Lenders may try to reduce their credit risk by offering lower loan amounts, given the ongoing correction in property prices

Falling real estate prices may offer some hope to those wanting to buy a house, but things may not be that easy.

Banks may turn cautious while disbursing home loans. Experts in the banking industry confirmed to Moneycontrol that loan disbursements can get stringent. This tightening can impact home and top-up loans. Two reasons are cited for this phenomenon. First, the repayment capacity of the average borrower has deteriorated. Second, in many cases, the prices of the properties that are acquired using loans (and also the collateral for the loan) are also decreasing.

Typically, in a crisis, banks tend to go slow on their lending activities. According to a TransUnion CIBIL Credit Outlook (TUCIBIL) report (June 2020), the approval rates for home loans declined by 16 per cent between the second quarter of 2008 and the first quarter of 2009 due to the global financial crisis back then. A repeat is possible in the post-COVID world.

Approvals apart, the demand for home loans are expected to be low in 2020.

What should you do?

While buying your dream house, do not rely on what banks told you before COVID struck. Check with the bank if the loan approval letter is still valid before entering into any property purchase deal. Pull out your credit report, and fix errors, if any. If you have taken a moratorium on your existing loans, be prepared for an extra-cautious stand from your banker while assessing your loan application. Repay your loans and credit card dues on time.

  • Posted at 6:22 am, November 13, 2020

    You can definitely see your expertise in the work you write. Julienne Reece Madeleine

  • Posted at 8:25 pm, November 13, 2020

    Ahaa, its pleasant discussion regarding this post at this place at this web site, I have read all that, so at this time me also commenting here. Bobette Porter Leona

  • Posted at 6:40 am, November 14, 2020

    In it something is. I thank for the help in this question, now I will know. Cindy Ab Doug

  • Posted at 6:22 pm, November 14, 2020

    Wonderful article! We are linking to this particularly great post on our site. Keep up the great writing. Katusha Timothee Abram

Post a Comment