Your EMI Outgo May Increase As SBI, HDFC Hike Prime Lending Rates

Till recently, it was the best time to buy property ─ home loan interest rates were hovering at a record low, a slowdown in the market had kept rates of property in restraint, and developers were willing to offer you bigger-better deals to make money in their time of financial crunch. However, in March, three banks, two public and one private, hiked their marginal cost of funds-based lending (MCLR) rates, that perfect combination is somewhat disrupted.  

State Bank of India (SBI) has hiked its one-year MCLR rate from 7.95 per cent to 8.15 per cent.  

Punjab National Bank (PNB) has hiked its one-year MCLR rate to 8.30 per cent from 8.15 per cent.  

ICICI Bank has increased its one-year MCLR rate to 8.30 per cent from the earlier 8.20 per cent.

Banks typically offer home loans on one, two and three-year MCLR rates. The hike in rates became effective on March 1.

Now, SBI has implemented a five-basis-point hike in base rate as well as benchmark prime lending rate (BPLR). It has raised its base rate from 8.65 per cent to 8.70 per cent while BPLR has been raised from 13.40 per cent to 13.45 per cent. The hike in base rate and BPLR means the cost of loan for existing borrowers who have not yet switched to the new lending benchmark is going to increase.

On April 9, India's biggest home loan provider HDFC Ltd also announced a hike in its retail prime lending rate (RPLR). The housing finance company has implemented a 20-basis-point increase its RPLR. Now, loans of over Rs 75 lakh will cost 8.70 per cent from the earlier 8.50 per cent. Similarly, 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. However, loans of up to Rs 30 lakh will cost 8.45 per cent from the previous 8.40 per cent. 

How does this impact you?

The hike in rates would impact your equated-monthly-installment (EMI) outgo. If you have taken a home loan of Rs 50 lakh from SBI, for instance, at 8.30 per cent for interest for the tenure of 20 years, you would be paying Rs 42,760 as EMI. A 25-basis point hike in interest rates would mean your monthly EMI burden would increase to Rs 43,550.

Can rates shoot up further?

While some experts are of the view that the hike in rates by some banks might have put an end to the ear of softened home loan rates, others are of the opinion that further hike in rates may not be on cards. Industry experts are of the opinion that the Reserve Bank of India (RBI) will maintain status quo when its monetary policy committee meets on April 4 for its bi-monthly review.