Banks hike floating home loan rates

HDFC and ICICI Bank are the two largest housing finance lenders in the country, have hiked their floating home loan rates by 0.75 per cent, which means a predicted over 12 percent of increase in the overall repayment.

ICICI Bank, biggest private sector lender of the country, has also increased the interest rate for retail fixed deposits by 0.75-1.00 per cent, which will come into effect from August 1.

In addition, bank has also increased its floating reference rate for consumer loans, including for housing by 0.75 per cent with an immediate effect.

Individually, HDFC informed that it has revised its retail prime lending rate on which adjustable home loans rate are benchmarked by 0.75 per cent, will be effective from August 1. With this hike, the floating rate home loans will cost at a minimum of 11.75 per cent for new HDFC customers, meanwhile bank has not touched the fixed rate which remains at 14 per cent.

While ICICI Bank sources said that the revised floating reference rate for its consumer loans will increase to 14.25 per cent, which are 13.5 per cent at present.

ICICI bank sources said fixed rate loans for its customers have been left unchanged. Although bank has announced a hike of 0.75 per cent in its benchmark advance rate, which would now increase to 17.25 per cent from 16.5 per cent currently.

The hike in floating reference rates by the banks means consumers will have to now take out over Rs 1,000 more every month as EMI for a loan of Rs 20 lakh, whose repayment is spread over 20 years. Yesterday few of the banks had announced hike in rates and others are expected to soon follow suit.

Hence on an 11.75 per cent floating rate, the EMI is estimated to work out to around Rs 21,675 per month, up Rs 1,031 from Rs 20,644 at a rate of 11 per cent. This is going to increase an overall additional burden estimated to Rs 2, 50,000 over the 20-year period.

Banks are revising rates in the wake of tight monetary measures announced by the RBI on Tuesday, when it asked the banks to maintain higher mandatory cash reserves with it and also increased its short-term key lending rates for them.

IDBI Bank, another private sector bank has increased its benchmark prime lending rate (BPLR) by 0.50 per cent to 14.25 per cent. As per bank release the increase will come into effect from August 1.

Yesterday Axis Bank hiked its PLR by 0.5 per cent to 15.75 per cent, which came into effect from July 31, while Jammu & Kashmir Bank has hiked its PLR by up to one per cent.

In order to tighten liquidity in the banking system to counter inflation, the apex bank has hiked the short-term inter-bank lending rates (repo rate) and mandatory cash reserve (CRR) by 0.50 per cent and 0.25 per cent, respectively.

According to experts in the coming years home loans can get costlier again as the RBI is expected to further tighten its monetary policy with additional CRR and repo rate hikes.

Other private-sector lenders Bank of Rajasthan (BoR) and Yes Bank has also hiked their BPLRs today by one per cent and 0.5 per cent to 16 per cent and 17 per cent, respectively.