The Housing Development Finance Corporation (HDFC) on Sunday announced a 5 basis point (bps) hike in its retail prime rate (RPLR) to 16.1%, to which its variable rate home loans are linked. While the mortgage lender’s existing customers will have to shell out more as their loans are reset, rates on new loans will remain unchanged, as new customers will receive a 5 basis point discount on the RPLR. New loans will continue to be priced between 6.7% and 7.15%.
HDFC’s decision to raise lending rates for existing customers follows similar hikes in April by State Bank of India (SBI), Bank of Baroda (BoB), Axis Bank and Kotak Mahindra Bank. . Mortgage rates at SBI currently start at 6.65% and at ICICI Bank from 6.7%. So far, rates for new retail loans remain unchanged across the system.
The rate cycle is widely believed to have turned after the Reserve Bank of India (RBI) signaled policy tightening as consumer inflation surged in the early months of 2022. A section of analysts now expect the Monetary Policy Committee (MPC) to raise the repo rate up to 75 basis points in FY22, which could lead to a rapid rise in lending rates to investors. individuals. Most new personal and small business loan rates are pegged to the repo rate.
In a report dated April 21, analysts at ICICI Securities said that with an increase in benchmark rates in FY23, the pace of transmission will be more efficient as the proportion of floating rate loans in the sector banking linked to external references will increase from 39.2% in December 2021. % of variable rate loans are linked to the base rate,” the report said.
The home loan market had seen particularly intense competition for much of 2021, as interest rates hit historic lows and lenders opted for aggressive pricing measures to take advantage of granted stamp duty benefits. by the states.