HDFC hikes lending rate by 50 bps; EMIs to go up

 Leading housing finance provider HDFC Ltd. upped its lending rate by 50 basis points on Friday after the Reserve Bank of India (RBI) hiked the policy repo rate by 50 basis points (bps) to 5.9% in its Monetary Policy Committee (MPC) held on Friday. In the last five months, HDFC has implemented a total of seven rate hikes.

"HDFC increases its Retail Prime Lending Rate (RPLR) on Housing loans, on which its Adjustable Rate Home Loans (ARHL) are benchmarked, by 50 basis points, with effect from October 1, 2022," the company said in a statement.

The interest rates on home loans are available from HDFC Limited starting at 8.10% p.a. This interest rate is applicable to loans for purchasing a new house, balance transfers, home renovations, and home expansions. The above-mentioned home loan interest rates are flexible during the loan's term and are determined by HDFC's benchmark Rate ("RPLR"). Both new and existing borrowers will now be required to make EMI payments that are 0.50% higher due to the corporation raising its key lending rate.

On September 30, the Reserve Bank of India (RBI) announced a 50 basis point increase in the repo rate, the fourth such increase since May. The cost of funds for banks and financial institutions would be increased soon as a result of the repo rate, and more banks and financial institutions are anticipated to follow. Meanwhile, as a result of the increase in the repo rate, both current and new loan borrowers would be required to make higher equivalent monthly installments (EMIs) for their car and home loans because it will now cost banks and lending companies higher to borrow funds.

SBI Home Loan की ईएमआई में आज से हो जाएगा बदलाव, आपकी जेब पर कितना पड़ेगा असर

 SBI has not yet revised the minimum interest rate on home loans in September. Effective August 15, 2022, the bank’s EBLR is 8.05%+CRP+BSP, as per the SBI website. RLLR is 7.65%+CRP.

However, depending on the credit score, a risk premium will be charged. This means a borrower with a credit score of more than 800 will now pay a minimum rate of 7.55 percent under the regular home loans.

For applicants who have a credit score of 800 or higher, the minimum interest rate on regular home loans is 8.05 percent. The risk premium in this case is 0. The risk premium is based on the CIBIL score; the risk premium rate increases with a lower credit score.

A credit score of 750 to 799 will result in a 8.15 percent interest rate with a risk premium of 10 basis points. Female borrowers will receive a 0.05 percent interest rate reduction.

Borrowers will be compelled to pay higher interest rates, i.e. higher EMIs, once the reset date arrives, or their loan tenure would be extended if there is room for it.

SBI Benchmark Prime Lending Rate BPLR

The banks Benchmark Prime Lending Rate (BPLR) was hiked to 13.45% p.a. w.e.f. 15.09.2022.

Top Mortgage Lender, HDFC, Sees Home Loan Demand Despite Rate Hikes

 Demand for home loans is strong in India and is expected to pick up further over the next few months, the head of major housing finance firm Housing.

Home loans have grown by 16% as of end July compared to same period last year.

"The economy is buoyant, the feel good factor is high, affordability is better so people are comfortable buying houses even if rates are slightly higher," Keki Mistry, chief executive of HDFC, told Reuters.

The central bank has already raised rates three times by a total of 140 basis points in this financial year to tame stubbornly high inflation, which has remained above the central bank's tolerance band for several months.

Lenders have passed on the interest rate rises but Mistry said that there are no signs of stress among home buyers and collections on loan dues remain robust.

Interest rates are expected to rise further with economists expecting at least another 60 basis points by March 2023, according to a Reuters poll.

"The economy feel good factor is so strong that (we) expect that festival season will be very strong," Mistry said, referring to the September to December period.

"I don't think we will see too much of a rise in interest rate going ahead, some increase will be there but don't think that will deter the buyers," he said.

Economists concur, with Madan Sabnavis, chief economist of Bank of Baroda saying in a report late last month that home buyers would be prepared for fluctuating home loan rates.

Housing loans have grown by 16% as of end July compared to same period last year, according to the latest central bank data.

Demand is likely to be particularly strong from India's larger cities, where sales had slowed between 2016-2020 but where a revival is now visible, said Mistry.