In view of the persistently high inflation, RBI has hiked key policy rates 12 times in the past 18 months, leading to higher interest burden for home loan borrowers. The reference floating rate for the industry has increased by 200-250 bps during this period, which translates into an average increase of 15% in EMIs. Although banks and housing finance companies have reset their benchmark rates, the increase has not yet affected customers who have opted for teaser loan schemes, which were launched in early 2009 to stimulate dwindling home demand. For a teaser scheme customer, the rates are fixed for the initial 2-3 years, and subsequently get linked to the prevailing market rates.

According to the Crisil report, a large number of borrowers who are on teaser loans will get hit with a sudden jump in rates when the teaser rates reset to market rates. This shift is expected to take place from April 2012. "As of March 2011, teaser loans accounted for 25% of the housing loan portfolio of Rs 5,100 billion." the report said. The difference between the teaser rate and the reset rate is likely to be as high as 300-350 basis points (bps).

The report has highlighted that at the end of June 2011 quarter the asset quality of industry players like HDFC, LICHFL and DHFL has deteriorated by 10-40 bps on a quarter-on-quarter basis. "We expect the NPA levels to go up by around 30 bps over the next 2 years to reach 1.9 per cent by March 2013," the report said. On the positive side, yields for financiers will improve in 2012-13 as teaser loans availed in 2009-10 get reset to market rates. "We expect yields for a teaser loan customer to increase by 300-350 bps once they are reset to market rates. This will have a net positive impact of around 30 bps on the net profit margins of housing finance players in 2012-13," Crisil said.

The impact of rising interest rates is best reflected on the EMI of a borrower with a 15-year home loan for Rs 15 lakh. With the current mortgage rates hovering around the 11%, the borrower's EMI would have risen by by 15% from Rs 14,771 to Rs 17,049. If rates were to go up to 13%, his EMI will rise to Rs 18,979. Calculate your Emi with home loan calculator