regular-article-logo Sunday, 04 June 2023

Trio raise lending rates

HDFC raises RPLR on housing loans against which its adjustable-rate home loans

Our Special Correspondent Mumbai Published 02.06.22, 02:17 AM
Representational Image

Representational Image File Photo

Three lenders raised the interest rates on their loans, a sign of a rising rate trajectory that will increase the EMIs for existing and new customers. HDFC has raised the retail prime lending rate (RPLR) on housing loans against which its adjustable-rate home loans (ARHL) or floating rate loans are benchmarked by 5 basis points. The hike will be effective from Wednesday.

ICICI Bank and Punjab National Bank (PNB) have announced a hike in their marginal cost of funds-based lending rate (MCLR).


This is the third increase effected by HDFC in the last one month.

Following the revision, the interest rate for new borrowers will range between 7.05-7.50 per cent depending on the individual’s credit score and loan amount.

While customers with credit scores above 780 will be charged an interest rate of 7.05 per cent, loans up to Rs 30 lakh will carry an interest rate of 7.5 per cent and those above Rs 30 lakh and up to Rs 75 lakh 7.40 per cent. For loans above Rs 75 lakh, the revised interest rate stands at 7.50 per cent.

For women borrowers, the interest rates will be 5 basis points lower in every segment. On May 1, HDFC had raised its RPLR by 5 basis points. The upward revision applied to existing customers only.

After the Reserve Bank of India (RBI) increased the policy repo rate by 40 basis points in an off-cycle meeting, the mortgage lender hiked the RPLR by 30 basis points which affected both its existing and new borrowers.

Private sector lender ICICI Bank too made EMIs expensive for its customers by raising the MCLR by 30 basis points across the board. The revision will be effective from June 1. Its one-year MCLR which largely determines interest rates on home loans is now at 7.55 per cent.

As of December 31, 2021, almost 58.2 per cent of the home loans given by commercial banks were linked to external benchmark while 33.1 per cent were under the MCLR framework. After the RBI move, various lenders which included Bank of Baroda, State Bank of India, Bank of Maharashtra, HDFC Bank, Kotak Mahindra Bank and Axis Bank had raised their MCLR.

In a regulatory filing on Wednesday, PNB said that it has raised the MCLR by 15 basis points across tenors. Its revised one-year MCLR will stand at 7.70 per cent.

With the RBI widely expected to raise the repo rate again in its meeting next week, bank loans could get more costlier. Though it is feared that such interest rate increases could dampen the demand for homes, observers feel that given the salary rise this is unlikely to happen for now.

``A one per cent increase in home loan interest rate reduces house purchase affordability by 7.4%. We are on a landscape of rising interest rates and increasing property prices, which will put pressure on affordability if they move beyond income growth. At the current juncture, strong income growth is supportive of homebuyer affordability. Hence, a comfortable affordability level coupled with the renewed enthusiasm for home ownership shall help maintain the strong housing sales momentum in the near term’’, Vivek Rathi, Director - Research, Knight Frank India said.

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