Banks hike home loan rates HDFC, ICICI hike by 75 bps

Inflation has already stretched everybody’s household budget. Now the banks are hiking interest rates on home loan which is going to further strain the budget as they have to reduce their spending to pull out more for EMI.

HDFC home loan market leader announced an increase of 50 basis points hike in interest rate for all its existing borrowers with floating rate loans. But for the new borrowers the increase will be around 75 basis points on floating as well as fixed rate loans.

After this increase the new customers will have to pay Rs 1,033 for every Rs 1 lakh as EMI on a 20 year loan. While for the existing floating rate customers EMI will increase by Rs 34 for every Rs 1 lakh loan with an outstanding tenure of 20 years.

Therefore after the revised structure the floating rate for new borrowers will be 11% and fixed rate 14%. The same level was last seen in the mid 90s. The hike in rates will be effective from July 1.

Along with HDFC the country’s second – largest bank, ICICI also announced a 75 basis points hike in the fixed as well as floating home loan interest. After this hike there will be 14.75% increase in the fixed loan interest perhaps the costliest in the sector.

Country’s largest public sector bank State Bank of India (SBI) will also be raising interest rates on home loans and auto loans by 50 bps on all linked to prime lending rates (PLR). SBI has increased PLR from 12.25% to 12.75% last week due to the increase in short-term lending rate to banks and the mandatory cash deposits that banks need to keep with the apex bank (CRR) by 50 bps each by the Reserve Bank of India. Punjab National Bank has also increased its PLR by 13%.

After the increase in PLR by the banks the households are now left with higher returns on deposits as their support. HDFC bank has hiked interest on deposits by 50bps while ICICI bank has increased by 50 to 100 bps more to new deposits and renewals.

In February HDFC bank had lowered its PLR by a quarter points. On the other hand the two public sector banks Canara Bank and Bank of India at present has decided not to hike home loan and auto loan rates even though they have increased interest rates for other categories of borrowers by 50 bps to 13.25%. On a floating rate basis, Bank of India is offering home loans in the group of 9.25-10% and Canara Bank is charging 10-10.75%.

Allahabad Bank and Dena Bank the state owned banks have also taken decision to raise PLRs by 50 bps to 13.5%. Canara Bank, Allahabad Bank and Dena Bank have increased their deposits by 25 to 75 basis points, whereas Bank of India is yet to decided on the same.