Tough times ahead....for new home buyers and those who have already taken loans under floating rates should be prepared. On the 30th of June 2008, Monday, the leader in the home loan market, Housing Development and Finance Corp (HDFC), and the largest private sector bank in India ICICI Bank, both announced raising home loan rates for existing as well as new customers by as much as 75 basis points (100 basis points=1%). They also announced raising deposit rates. The hike in interest rates as well as deposit rates for HDFC is effective from 1st of July 2008 while for ICICI Bank it was June 30th 2008.
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For every Rs 1 lakh of home loan of 20 years tenure under the floating rate, the increase in monthly installment would be Rs 34 while for loans of 15 years, the increase would be Rs 32 for existing HDFC customers. For new customers, for every Rs 1 lakh of loan for 20-year tenure, the EMI would work out to Rs 1,033.
The Reserve Bank of India (RBI) raised key rates for banks last week by 50 bps, the second increase this month. This is one of the reasons for hiking the Bank rates. This decision taken by RBI was aimed to bring down the inflation rate which was at 11.42% last week, is at a 13 year high level. The countries prominent bank the SBI increased its lending rate by 50bps to 12.75% last Thursday. Most of the PSU banks have also increased the rates some banks are SBI, Union Bank of India, Punjab National Bank, State Bank of Bikaner & Jaipur and Corporation Bank.
HDFC has however spared its existing customers some inconvenience by raising floating rate by 50 basis points (bps), while new customers would be faced with a hike of 75bps. In ICICI Bank, the 75bps hike is across-the-board.
For new home loan customers with HDFC, the floating rate of interest would be at a minimum of 11% per annum, while the fixed rates will be at 14%, a release from the company said. HDFC has also increased its rates on deposits by 50 basis points for most tenure.
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