Home Loan Rates Hit the Roof

New home buyers and those who have already taken loans under floating rates should prepare for tough times ahead. On Monday, Housing Development and Finance Corp (HDFC), the leader in the home loan market, and ICICI Bank, the largest private sector bank in India, both announced raising home loan rates for existing as well as new customers by as much as 75 basis points (100 basis points=1%). Both the entities also announced raising deposit rates. The hike in interest rates as well as deposit rates for HDFC is effective July 1 while for ICICI Bank it was June 30.

Post this hike, for existing HDFC customers, for every Rs 1 lakh of home loan of 20 years tenure under the floating rate, the increase in monthly instalment would be Rs 34 while for loans of 15 years, the increase would be Rs 32. For new customers, for every Rs 1 lakh of loan for a 20-year tenure, the EMI would work out to Rs 1,033. The hikes come after the Reserve Bank of India (RBI) raised key rates for banks last week by 50 bps, the second increase this month. The RBI decision was aimed at bringing down inflation rate, which, at 11.42% last week, is at a 13-year high level. SBI, the country's biggest bank, increased its lending rate by 50bps to 12.75% last Thursday. Some other PSU banks-Union Bank, State Bank of Bikaner & Jaipur and Corporation Bank-have also followed SBI in increasing rates.

HDFC has however spared its existing customers some inconvenience by raising floating rate by 50 basis points (bps), while new customers would be faced with a hike of 75 bps. In ICICI Bank, the 75bps hike is acrossthe-board. For new home loan customers with HDFC, the floating rate of interest would be at a minimum of 11% per annum, while the fixed rates will be at 14%, a release from the company said. HDFC has also increased its rates on deposits by 50 basis points for most tenures. The rate of interest on consumer loans from ICICI Bank has also been increased by 75bps. The bank has increased its floating reference rate (FRR) for consumer loans by 75 basis points with effect from June 30. The revised FRR will be 13.50% per annum from 12.75% at present, a release from the bank said.

Bank of India increased its benchmark prime lending rate by 0.5 per cent to 13.25 per cent. With this, loans in all segments except auto, home and agriculture portfolios will become dearer to BoI's borrowers, a senior BoI official said. "Interest rates on all PLRrelated loans except home, auto and agriculture segments will go up with the PLR hike with effect from July 1," the official said. Dena Bank announced a 0.5 per cent hike in PLR. The bank also hiked its domestic term deposit rates by 0.25-0.75 per cent for various maturities. Allahabad too decided to increase its benchmark prime lending rate by 0.5 per cent to 13.50 per cent, effective July 2.