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Understanding The Post-Lockdown Mortgage Industry Before Buying A Home

Mortgage Industry
Buying a home is a major investment decision that needs to be taken after researching the mortgage industry thoroughly, especially now that COVID lockdowns have started easing. After all, the latest regulations and trends in this industry can affect you in more ways than one. Moreover, you need to account for the demand and supply dynamics in the housing industry, before you decide what kind of house to buy and how you can best finance the purchase without hurting your financial stability.
So, read on to explore these in detail and make house-shopping less daunting.

Also Read: Quick Guide to Mortgage Loans

Trends in the Mortgage Industry
When you decide to buy a property, the most important question that arises is how to arrange for the necessary funds or avail a home loan. So, first, it is important to look at the mortgage market to understand the latest trends.
 
  • Interest rate trends
The good news on the interest rate front is that major financial institutions have reduced the Prime Lending Rate (PLR) by 20 - 25 basis points following a repo rate cut by the RBI in May 2020. As the RBI has been slashing repo rates by 115 basis points since March 2020, the benefit is being passed on to home loan borrowers by major lenders.  
 
  • Ease of loan default norms
The RBI has extended support to retail borrowers in the form of loan moratoriums, which they can opt for if they face any difficulty while paying EMIs. As a borrower, you can go for a loan moratorium without affecting your credit score. This can help your liquidity position during these difficult times.
 
  • Government support – Affordable housing initiatives
The Government has been extending support to the lower and middle income groups through Pradhan Mantri Awas Yojana and Credit Linked Subsidy Scheme(CLSS) for MIG, where depending upon the income level, the borrowers become eligible for loan interest subsidy. Also, for first-time home buyers, the interest on home loans can be claimed for exemption under section 80EEA of the Income Tax Act, and this benefit has been extended till March 2021.

 

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Also Read: Beginner’s Guide For Taking A Loan Against Property

Demand-Supply Trends in the Housing Industry
With most migrant workers moving back to their home towns in the wake of the lockdown, the construction of many major housing projectshad come to a halt. Currently though, lockdown measures are easing in places and the workers are returning to their sites.So, the supply of property projects is expected to rise gradually.
When it comes to demand for housing projects, despite temporary financial instability, many people are considering investing in real estate for long-term benefits. Moreover, those who are currently putting up with rented accommodations or a congested locality will want to buy a home that offers sufficient space, distancing and safety. Government support and attractive interest rates can further fuel this demand. So, based on the demand and supply dynamics, real estate prices have been more or less steady despite the pandemic.

Also Read: Home Loan vs Loan Against Property: What should you choose?

Future Outlook
All in all, based on mortgage industry and housing industry trends, it can be assumed that both supply and demand for homes will increase gradually, as the lockdown continues to ease. With financial institutions offering affordable interest rates and moratoriums, and the government providing subsidies, this might be the right time to purchase a home. However, assessing your future income, repayment ability, credit score and needs is vital before taking such a plunge. Comparing the home loan structures of multiple lenders can also help you choose wisely.
 


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Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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