HDFC, PNB, ICICI raise loan rates

Equated monthly installments on home loans for new and existing borrowers have gone up as several lenders once again raised their lending rates. On Wednesday, India’s largest mortgage lender Housing Development Finance Corporation (HDFC) increased its retail prime lending rate (RPLR) by 5 basis points, its third increase in a month.

Another lender Punjab National Bank increased its marginal cost of funds-based lending rate by 15 basis points while ICICI Bank hiked its MCLR by 30 basis points across tenors. Bank of India too increased its MCLR rates.

The new rates would come into effect from Wednesday.

MCLR is an internal benchmark used by banks to price corporate loans. The hike in MCLR would also impact a section of retail and small business borrowers who took loans before October 2019.

“HDFC increases its retail prime lending rate (RPLR) on housing loans, on which its adjustable rate home loans (ARHL) are benchmarked, by 5 basis points, with effect from June 1,” HDFC said in a statement. Depending on the category of borrower and loan amount, the new interest rates for HDFC customers range from 7.05 per cent to 7.50 per cent. Earlier this month, HDFC had hiked its RPLR by 30 basis points.

The revised rates for new borrowers range between 7.05 per cent and

7.50 per cent, depending on the credit score and loan amount. The existing range is 7 per cent to

7.45 per cent. The latest increase means borrowers below a credit score of

780 have to pay a minimum of 7.15 per cent for loans up to Rs 30 lakh and

7.40 per cent for loans between Rs 30 lakh and Rs 75 lakh. Loans above Rs 75 lakh will be given at

7.50 per cent. HDFC offers a 5 basis points discount to women borrowers in all categories.

The Retail Prime Lending rate is the rate at which housing finance companies give loans to their customers who are most creditworthy. When lenders give out their loans to the customers, RPLR is considered the benchmark against those rates.

Vivek Rathi, director research at Knight Frank

India said, “A one per cent increase in home loan interest rate reduces house purchase affordability by 7.4 per cent. 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.”

HDFC follows a threemonth cycle for repricing its loans to existing customers. So, the loans will be revised in sync with increased lending rate based on the date of the first disbursement of each customer.

Earlier on May 1, HDFC Ltd had hiked its benchmark rate by 5 basis points and followed it up with a 35 basis point hike on May 7.

Punjab National Bank’s six months MCLR has risen from 6.95 per cent to

7.10 per cent while the one-year MCLR has risen from 7.25 per cent to

7.40 per cent effective June 1.