CHAPTER-10

IMPORTANCE OF FACTORS AFFECTING HOME LOAN PURCHASE

In chapter 6 we discussed the various factors which affect the home loan service quality
and hence the home loan purchase. But these factors are not of equal importance to
customers. Some factors might be of more relative importance to customers, while others
may not be. It is important to study these factors and understand their relative importance
when it comes to service quality and influencing the purchase decision.

Various factors which affect the home loans which have been discussed earlier are

1. Interest rate
2. Pay Back Period
3. Banks flexibility
4. Prepayment Charges
5. Security by banking institutions
6. Disbursement time
7. Miscellaneous Expenses
8. Charges for late payment of EMI
9. Good treatment in other relevant product and service
10. Employee Courtesy and Staff Training
11. Reputation of the Banking Institution
12. Appearance of bank branches

PRIMARY RESEARCH

A primary research has been conducted to study the relative importance of the factors
mentioned above in service quality of home loans. For the purpose of primary research a
questionnaire has been developed (Annexure 2). The questionnaire is derived keeping in
mind the factors mentioned above. Each parameter has been followed by a rating ranging
from 1 to 5. The relative importance of these ratings is:

1. Not Relevant
2. Not Important
3. Important
4. Very important
5. Most Important

The options chosen by the respondents would indicate the factors which are most
important for choosing home loans and factors which are not as important as others.
Sample Size

In this study the sample size is 30 respondents. 83.33% of the participants are men
and 16.67% are women. Regarding their age, it has been observed that, as most
bank customers are of a certain age. 60% of the samples are between 21 and 30
years of age, 6.67% are between 31 and 40 years of age, 20% are from 41 up to 50
years of age, 20% are between 51 and 60 years of age, and 3.33% are over 60
years old.

Age of Respondents Number of Percentage of

Respondents Respondents
21-30 18 50%
31-40 2 6.67%
41-50 6 20%
51-60 3 20%
Above 60 1 3.33%

ASSESSMENT OF RESPONSES

Interest Rate
It is very important for banks to recognize the factors that affect the customers’
choice for the purchase of mortgage products. For most customers interest rate is
considered as most important criteria for selection of banks for home loans. There
was no respondent who thought that interest rate criteria is not important or not
relevant when purchasing a home loan.

Particular Frequency Percentage

Important 1 3.33%
Very Important 10 33.33%
Most Important 19 63.33%
 Interest Rate as

Pay-back period

The pay-back period of loans does not appear to occupy the mind of customers to
a great extent as it is in interest rate; but it is an important or very important factor
to most of the customers. A collective percentage of 83.33% responded that it is an
important factor. Only 16.66% responded that is not important. It was not
considered as the most important or a not relevant factor by any of the
respondents.

Particular Frequency Percentage

Not Important 5 16.66%
Important
Very Important
14
11 64% 46.67%
36.66%
 Pay Back period as a Criteria for Bank Selection
16%

37%
Not Important

Important

Very
Important

47%

Flexibility
The bank’s flexibility for granting loans is also considered to be an important
factor for selecting the bank. Only 10% responded with not relevant and 10% said
it was not important. None of the respondents felt that it is the most important
factor.

Particular Frequency Percentage

Not Relevant 3 10%
Not Important 3 10%
Important 14 46.67%
Very Important 10 33.33%

Flexibility as a

50%

40%
Prepayment Charges

The response in case of prepayment charges has been a mixed one. No respondent
thinks of it as the most important criteria for home loans. Whereas only 6.67%
people think that it is very important. 50% people think that it is important. Rest
people place it in the not relevant or not important criteria.

Particular Frequency Percentage

Not Relevant 5 16.67%
Not Important 8 26.67%
Important 15 50%
Very Important 2 6.67%

Prepayment Ch

50%
Disbursement Time

40%
With respect to disbursement time, i.e. the time period needed between submitting
the documentation, getting approval and receiving the money. For 80% clients,
this is a very important or important element. Only 3.33% respondents think it is
the most important factor for rest it is not important.

Particular
30% Frequency Percentage
Not Important 5 16.67%
Important
20% 10 16.67% 33.33%
Very Important 14 46.67%
Most Important 1 3.33%

10%

0%
 Disbursement

50%
Security

40%
The security provided by banks to customer also had a response from most
customers as an important factor. Few respondents also marked it as a not relevant
factor. None of the respondents thought of it as the most important factor.

Particular 30% Frequency Percentage

Not Relevant 3 10%
Not Important 6 20%
Important
20% 17 16.67% 56.67%
Very Important 4 13.33%

10%

0% Securiy as a
Not Important Imp

60.00%

50.00%
Miscellaneous Expenses

83.33% clients consider additional expenses as very important or important

criteria for selection of bank. These expenses are notary, legal expenses,
processing expenses, etc. None of the respondents think of it as not relevant factor
or the most important factor.

Particular Frequency Percentage

Not Important 5 16.67%
Important 12 40%
Very Important 13 43.33%

Miscellaneous E

50%
Charges for late payment of EMI

40%
The responses for this criterion were evenly spread among the Important, Not Important
and Not relevant criteria. None of the respondents thought of it as a very important or
most important criteria for home loans.

Particular Frequency Percentage

Not Relevant
Not Important
30% 7
11
23.33%
36.67%
Important 12 40%
17%
20%

10%

0%
 Charge on late EM

40%
Good treatment in other relevant Products and Services

The level to which customers are affected by previously-received favouring

30%
treatment in other banking products has also been examined. Previously-received
23%
treatment in other banking products affect the largest part of bank clients and only
13.33% report it as not important and 6.67% not relevant, but none regard it as
most important criterion.

Particular
Not Relevant 20% Frequency
2
Percentage
6.67%
Not Important 4 13.33%
Important 20 66.67%
Very Important 4 13.33%

10%

0%Good Treatment in
Not Relevant

80%

60%
Employee courtesy and Staff Training

Due to the particular nature of banking services and the major role of banking
employees in the delivery of services, the majority states that their decision is
influenced by the attitude of employees.

Particular Frequency Percentage

Not Relevant 3 10%
Not Important 7 23.33%
Important 17 56.67%
Very Important 3 10%

Employee Courtes

60.00%
Reputation of Banking Institution
50.00%
It is very important for banks to recognize the factors that affect the customers’
choice for the purchase of mortgage products. For most customers, the reputation
40.00%
of banking Institution is considered to be the most important criterion in the
selection of the bank.

Particular
Not Relevant
30.00%
Frequency
2
Percentage
6.67%
Not Important 5 16.67%
Important 20.00% 9 30%
Very Important
Most Important
11
3
10.00%
36.67%
10%
10.00%
0.00%
Not Relevant Not
 Bank's Reputation
40.00%
Appearance of Bank Branches
30.00%
Appearance and physical presence as a factor of home loan purchase is not a very
important in the minds of many customers, though for some customers it is important.

16
Many customers think that it is not an important criterion for home loan selection.

Particular
20.00%
Frequency Percentage
Not Relevant 7 23.33%
Not Important 13 43.33%
Important
Very Important
10.00% 8
2
6.67%
26.67%
6.67%

0.00%
Not Relevant Not Imp
Physical Pres

50%

40%
After evaluating the 12 parameters on which customers choose home loans and evaluate
its service quality, the total and the average score of the parameters are as follows.

Parameters Total Score Average Score

Interest Rate 138 4.6
Pay Back Period 96 3.2
Flexibility 91 3.03
Prepayment Charges 74 2.47
Disbursement Time 101 3.36
Security 82 2.73
Miscellaneous Expenses 98 3.27
Charges for Late EMI 65 2.17
Good Treatment in Other Products 86 2.86
Employee Courtesy and Staff Training 80 2.67
Reputation of Banking Institution 98 3.27
Appearance of bank Branches 75 2.50

5.00 4.60
4.50 Aveage Scor
4.00
3.50 3.20
3.03
3.00 2.
2.47
2.50
Interest rates, Disbursement time, Reputation of the Banking Institutions are the factors
2.00
which are of relatively higher importance to the customer, where as Charges for late EMI,
Prepayment charges and Appearance of bank branches are relatively lesser important

1.50
1.00