Home Loans To Cost More As Many Banks Hike Rates
The perfect synergy caused by record low interest rates and depreciated property prices that worked in a homebuyer’s favour is about over now. At a time when rates of property are seen stabilising, several banks have increased lending rates. Buying property is not going to be as cheap anymore.
On September 2, country's largest lender State Bank of India (SBI) increased the lending rate by 20 basis points across all tenors up to three years. Now, SBI's overnight and one-month tenors' Marginal Cost of Funds-Based Lending Rate (MCLR) stands at 8.1 per cent as against 7.9 per cent. The MCLR for a one-year tenor increased to 8.45 per cent from 8.25 per cent earlier. Most of the retail loans are benchmarked against one-year MCLR. The MCLR for a three-year tenor of SBI increased to 8.65 per cent from 8.45 per cent. ICICI Bank has increased its one-year MCLR rate by 15 basis points to 8.55 per cent.
On September 5, Bank of Baroda increased MCLR by five basis points across tenors. While the bank's one-year MCLR is now 8.55 per cent as against 8.50 per cent earlier, three-month MCLR will attract 8.20 per cent interest. The hike comes into effect from September 7.
Earlier action
On June 1, two public and two private lenders announced their plans to hike interest rates, days before the Reserve Bank of India’s (RBI) bimonthly monetary policy review. While SBI, Punjab National Bank (PNB) and ICICI Bank increased their marginal cost of funds-based lending rate (MCLR) by up to 10 basis points, HDFC increased its retail prime lending rate (RPLR) by an equal number.
PNB had raised the MCLR for three-year tenors to 8.55 per cent. The country’s second-largest lender has also increased its base rate to 9.25 per cent from the earlier 9.15 per cent. (While home loans sanctioned till March 2016 are linked with base rate, loans sanctioned after April that year are linked with the new MCLR regime. A major part of home loans in India are still linked with base rate.)
What happens now?
Banking experts are of the opinion that other banks would follow the move and announce hike in interest rates soon.
Sector experts, however, opine that the RBI will go for status quo on repo rate when it announces its monetary policy review on June 6. Repo rate is the rate at which the central bank lends money to financial institutions. The rate currently stands at six per cent.
With inputs from Housing News