HDFC, others hike home loan rates by 25 basis points
02 Feb 2011
Home loans will now be costlier as Housing Development & Finance Corp, the country's largest mortgage finance company, deciding to increase its benchmark lending rate by 25 basis points, and several other lenders following suit.
A 25 basis point hike in the lending rate would result in the equated monthly installments (EMI) going up by around Rs17 for a loan of Rs1 lakh of 15-year tenure.
Besides HDFC, other lenders like Bank of India, Indian Overseas Bank and Indian Bank also increased their base rates -- the benchmark to which all variable rate loans are pegged - to 9.5 per cent from 9 per cent on Tuesday.
Home loans provided by all these banks will become more expensive as all floating rate loans in banks are now linked to the base rate.
An increase in the retail prime lending rate will impact all borrowers, new as well as old. HDFC will now charge 10 per cent interest on home loans above Rs30 lakh and 9.75 per cent on loans up to Rs30 lakh. Loans above Rs75 lakh will bear an interest rate of 10.25 per cent.
HDFC's rate revision comes on the back of a number of banks revising their base rates. Banks are a large source of funds for the housing finance company and an increase in their lending rate would push up its cost of funds.
ICICI Bank said it continues to offer home loans at 9.5 per cent and 9.75 per cent for loans up to Rs30 lakh and above Rs30 lakh, respectively.
In recent months, ICICI Bank's home loan rates have been tracking those of HDFC. LICHF is trying to hold on to its present lending rates where borrowers can get loans at 9.75 per cent until the month-end. According to a banker, the hikes reflect the increase in the cost of funds experienced by banks.
The extension of the scheme depends on whether the National Housing Bank classifies as 'teaser' loans the company's `Advantage 5' scheme, where home loans for the first five years are fixed between 9.75 per cent and 10.1 per cent.
"The Reserve Bank of India's rate hikes have an impact over a period of time and the impact of the latest round of hikes will also be felt in coming months," said a general manager at a private bank. But, at the same time, there is a slowdown in home buying in Mumbai, which has resulted in a slowdown in the number of borrowers from Mumbai.
