April 10: Housing Development Finance Corp, India’s largest mortgage financier, has increased its retail prime lending rate by 20 basis points across various maturities.
Loans for up to Rs 30 lakh will now have an interest rate of 8.4%, up by 5 basis points, while loans above 30 lakh and less than Rs 75 lakh will have interest rate of 8.6%, up by 20 basis points. Adjustable rate home loans, which is benchmarked on PLR, also gets hiked by 20 basis points to 8.7%. The new rates will be with effect from 1st April 2018.
HDFC is increasing the PLR for the first time since December 2013. The hike comes almost one year after HDFC cut interest rate on home loans by 15 basis points. Female borrowers will continue to receive the discount of 5 basis points on the increased interest rates.
A rise in EMI on retail loans including home and car loans was signaled previously after many banks including SBI had increased the lending rates. In March, SBI hikled Marginal Cost of Funds based Lending Rate (MCLR) by 20 basis points to 8.15%. This was followed by the increase of one-year MCLR by ICICI to 8.3%.
Borrowings of companies would also become expensive with the hike in interest rates. The current move from banks follows an 18-year month period of soft interest rates. Bankers are of the opinion that the current increase is caused by rise in deposit rates and overall cost of funds in addition to shortage of liquidity in the system.
As with HDFC, individual loans accounts to over 70% of the bank’s assets under management. 70% of the incremental loans came from individual loans during the December quarter. HDFC’s loan book stood at Rs 3.42 lakh as on December 31 2017 compared to Rs 2.87 lakh crore during December 2016.