HDFC raises home loan interest by 30bps after RBI repo rate hike

Mortgage lender Housing Development Finance Corporation (HDFC) raised the interest rate on home loans by 30 basis points on Saturday, effective May 9, following the monetary policy committee’s decision to raise the repo rate. benchmark of 40 basis points earlier this week. The new rates will start at 7 percent from 6.7 percent previously.

HDFC joins a list of lenders, including ICICI Bank, Bank of Baroda, RBL Bank, who raised interest rates following MPC’s rate hike at an off-cycle meeting.

“HDFC is increasing its Retail Prime Lending Rate (RPLR) on home loans, on which its Adjustable Rate Home Loans (ARHL) are benchmarked by 30 basis points effective May 9, 2022,” the lender said in a statement. . The mortgage lender had also raised interest rates on home loans last week, but only for its existing borrowers, by 5 basis points. Thus, for existing customers, the interest rate for home loans will increase by 35 basis points.

“HDFC follows a 3-month cycle to resume lending to existing customers. Thus, the loans will be resumed based on the date of the first disbursement of each client,” the lender said.

For new customers, on loans up to Rs 30 lakh, the interest rate will be 7.10%. And, for loans between Rs 30 and 75 lakhs, the interest rate will be 7.35%, while for loans above Rs 75 lakhs, the interest rate will be 7.45%.

Earlier this week, ICICI Bank raised its benchmark external lending rate by 40 basis points to 8.10% while Bank of Baroda raised its repo-linked lending rate to 6.90%. The public sector lender also withdrew interest rate subsidies available for home and car loans that had been introduced to boost retail credit. RBL Bank’s repo-linked lending rate is now 9.50%, effective May 4, 2022.

A group of lenders including Bandhan Bank, Kotak Mahindra Bank, Jana Small Finance Bank, Bank of Baroda, ICICI Bank and Punjab National Bank have also announced deposit rate hikes across multiple duration baskets for retail customers.

The MPC raised the benchmark repo rate to 4.40% in an off-cycle meeting amid upside risks to inflation, signaling that the rate cycle has reversed and the days of ultra-low interest rates are over. This is the first rate hike in 45 months since August 2018.

Analysts are of the view that the increase in the benchmark repo rate will bode well for banks as they will benefit from higher returns on the portfolio of loans that are linked to external benchmarks, but the rise in CRR will have a negative impact on lenders’ margins and could offset the benefit of rising repo rates.

In December 2021, just over 39% of banking system loans were linked to the external benchmark, according to data from the Reserve Bank of India (RBI), with 58.2% of real estate loans linked to external benchmarks.

The share of MSMEs, personal loans, car loans and education loans linked to an external reference is 69.2%, 46.2%, 31.1% and 23%, respectively, according to RBI data. .

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