Even when affordability is a limitation, people dream of owning their own house or apartment one day. Now with rising purchasing power, people can attempt to turn their dream into reality, thanks to many institutions offering home loans throughout the country. Therefore, one must educate oneself to make an informed decision.
Existing customers are charged higher interest rates – This is not really true, when the interest rate is fixed and the market rate has reduced after customer takes on the loan. So naturally, new customers will get lower interest rate.
You end up paying more interest than the loan amount – This is not always true, as the EMI paid every month has a principal component as well as interest. As the principal gets paid, the loan outstanding also reduces, which brings down the interest payment on it. But the longer the tenure, the higher will be the interest paid to the bank.
Fixed interest rate cannot be changed - Not true. Most of the fixed rate home loan does have a reset clause stating that the rate is subject to revision. So interest rate can be changed for fixed product if required.
Variable vs Fixed vs Split - Each of the interest rate types has its own merit and demerits. Depending on situation each type can serve better for customer. As fixed rate is a win when interest rate is low but variable rate can be benefiting when the rate is high and is expected to go down in future.
Time value of your money - Long term will reduce the monthly payment. If monthly payment is low, you are saving a portion of your money that has more value now from being given away to the lender. Also, the customer then should consider increasing the term to reduce monthly payment burden. Paying less but for long is better than not being able to make payment at all.
Loans can be disbursed in full or in installments. In case of an under construction property, the disbursement can be made in instalments based on the progress of construction and not according to an agreed upon time - based schedule. This can potentially prevent the developer from slacking since his cash inflow would be withheld, and customers can expect a timely handover of property.
Interest on housing loans has come down to single digits. With so many financial institutions around us, eligible potential loaners now have comparatively more bargaining power than ever before. Loan providers can make the entire loan application and disbursement process simpler to cater to this growing market.
The Market Capitalization (Mcap) /GDP ratio lowered to 17% in 2018 from 24% in 2014, whereas the peer countries mostly picked up for peer countries. One potential reason for this phenomenon is lack of listing of large corporates in the market. However, 2018 witnessed a number of developments in the form of partnerships and regulations. The strategic partnership between DSE and a Chinese consortium of Shanghai and Shenzhen Stock exchanges is expected to contribute in capital market improvement. BSEC approved the draft Qualified Investor Offer by Small Capital Companies Rules, 2018 that is expected to increase efficiency of the market by providing a separate market for small cap companies.
Future prospect of the capital market in 2019 looks bright as government expects GDP growth to be at 7.8% and inflation at 5.6%. Economic Intelligence Unit (EIU) and UN predicted Bangladesh to be one of the fastest growing economy. Provided that interest rates remain under control and liquidity conditions improve, the market is expected to perform better. Stable political environment will attract foreign investment and improvement of exports and remittance can help ease pressure on currency.Download View