Home Loans To Cost More As HDFC Hikes Benchmark Rate By 20 Bps
Days after public lender State Bank of India hiked its base rate and benchmark prime lending rate (BPLR) by five basis points each, India’s largest mortgage banker HDFC Ltd has implemented a 20-basis-point or (0.20-percentage-points) increase in its retail prime lending rate (RPLR). This is for the first time since December 2013 that HDFC has hiked RPLR.
While the Reserve Bank of India (RBI) has maintained a status quo on repo rate for the fourth time in a row on April 5, banks have been hiking interest rate since late 2017 owing to a squeeze in liquidity.
What changes now?
After the hike that was announced on April 9 and which comes into effect from April 1, HDFC lending rate now stands at 16.35 per cent. At 16.75 per cent, HDFC’s benchmark lending rate was highest in December 2013. From there, it touched a low of 16.15 per cent.
The increase in rates is, however, different for different categories. Rates for home loans of over Rs 30 lakh have been raised by 20 bps while rates for home loans below Rs 30 lakh have been hiked only by five bps, considering affordable housing has been conferred an infrastructure status by the government in Budget 2017.
For clarity’s sake, it must be noted here that before the marginal cost of funds-based lending rate (MCLR) regime came into effect in 2016, home loan interest rates were linked to base rate since 2010. Prior to that rates were linked to the BPLR system; some banks, including HDFC, also refer to this regime as the RPLR system. Home loan interest rates are calculated by reducing the spread from the RPLR.
By that calculation, while loans of over Rs 75 lakh will cost 8.70 per cent from the earlier 8.50 per cent, cost of home loans between Rs 30 lakh and Rs 75 lakh will rise to 8.60 per cent from the current 8.40 per cent. Loans below Rs 30 lakh will now cost 8.45 percent from the previous 8.40 per cent. In all these slabs, however, women borrowers will enjoy a rebate of five bps.
It is worth mention here that HDFC is a housing finance company (HFC) and not a bank. While banks are governed by the Reserve Bank of India, HFCs are governed by the National Housing Bank.