Published on August 8, 2018 @ 3:53 pm
With the Reserve Bank of India (RBI) recently hiking the repo rate by 25 basis points to 6.50 percent, some banks have started to pass on the burden to customers by increasing their lending rates. Some banks and HFCs such as Indiabulls Housing Finance, HDFC, Kotak Mahindra Bank, Union Bank of India and Karnataka Bank have announced hiking interest rates.
In fact, some banks had begun hiking interest rates since June this year, when the RBI announced the first rate hike in more than four years.
The move to raise interest rates on home loan by the housing finance companies and banks have again come immediately after the RBI hiked its repo rate for the second time in two months. A higher repo rate makes it more expensive for lenders to borrow funds from the central bank.
While Kotak Mahindra, Union Bank of India and Karnataka Bank announced rate increases on Thursday, HDFC revised its retail prime lending rate (RPLR) by 20 basis points on the next day after RBI raised its repo rate.
Indiabulls Housing Finance
Second largest mortgage lender Indiabulls Housing Finance on Monday announced an increase of its home loan rates by 20 basis points (bps) for women and 25 bps for men, with immediate effect.
After the revision, the interest rates on home loans for women worth up to Rs. 35 lakh will start at 8.7 percent, and 8.80 percent onward for loans above Rs 35 lakh, Indiabulls Housing Finance said in a statement. The interest rates will be 5 bps higher for non-women applicants.
The company has also expanded the lowest slab from Rs 30 to Rs 35 lakh, allowing a larger pool to reap the benefits of the best possible rate. The lender said the revised interest rates on home loans will be applicable to new and existing customers.
Indiabulls Housing Finance said the increase in lending rate follows the growing cost of funds led by the second consecutive raise on repo rate by the RBI this month.
HDFC Raises Loan Rates By 0.20%
India’s biggest mortgage lender Housing Development and Finance Corp (HDFC) announced to increase its retail prime lending rate (RPLR) by 20 basis points or 0.20 percent. The company said that the revised rates will be applicable with effect from August 1, 2018.
HDFC’s decision to hike lending rates comes just one day after RBI hiked the repo rates by 25 basis points to 6.50 percent for the second consecutive time on last Wednesday. The housing finance organization already raised its loaning rate on 4 June.
Following the latest increase, home loans for HDFC borrowers up to ₹30 lakh will now be available for 8.75 percent while women borrowers will get the loan at 8.70 percent. Home loans above ₹ 30 lakh will be available at 8.8o percent for women and at 8.85 percent for other borrowers.
The home loans for self-employed female borrowers start at 8.50 percent, while that for male borrowers start at 8.55 percent for small-ticket loans.
Union Bank Of India
Union Bank of India, Kotak Mahindra Bank, and Karnataka Bank have announced to increase their marginal cost of lending rates (MCLR) by 5-10 basis points. Union Bank Of India raised its one-year MCLR by 10 bps to 8.55 percent.
Kotak Mahindra Bank
On last Wednesday, Kotak Mahindra Bank also raised its one-month and three-month MCLR by 5 basis points to 8.20 percent and 8.55 percent, respectively. The effective interest rate for salaried individuals is 8.65 percent, while that for the self-employed is 8.75 percent.
All these mortgage companies and the banks pass on the rate hike to consumers due to the increase in cost funds as a result of the increase in the repo rates. In fact, the repo rate hike announced by RBI on Wednesday was the second consecutive hike in last three months.
State Bank of India (SBI), ICICI Bank and Punjab National Bank have still not changed their MCLR rates even after the RBI’s recent rate hike. While other lenders are yet to announce a lending rate hike, some banks have already started increasing deposit rates. SBI on Tuesday raised its fixed deposit rates by up to 10 basis points, just ahead of the monetary policy review meeting. This will ultimately increase their cost of funds.
Therefore, banks’ lending rates, which are linked to the cost of funds, are set to increase following repo rate hike. So, if you are planning to take a home loan, you should go ahead before other banks hike up lending rates.