HDFC Ltd, India’s largest home loan provider, has hiked rates by 20 basis points. This is the second time the lender increasing hiked in this financial year. The last rate increase by HDFC was on June 2, much before that quarter’s RBI’s monetary policy review, when home loan rates were raised by 10 bps.
The current rate hike comes shortly after an RBI decision to increase the repo and reverse repo rates, which were raised by 0.25% to 6.25% and 6.5% respectively.
Retail Prime Lending Rate
HDFC has increased its RPLR (Retail Prime Lending Rate) to 16.65%. This is close to the previous RPLR peak of 16.75% in December 2013. A hike in the RPLR translates into a hike for existing borrowers, in the manner described below.
Home loan rates for retail borrowers of HDFC are tied to the RPLR. The change for existing borrowers is determined by the spread between the rate at which they originally borrowed and the RPLR prevailing at that time. For example, if you took a loan at 10% and the RPLR was 16.5%, your spread is 6.5%. A hike in RPLR to 17% will push up your rate by 0.5% to to 10.5% (17% – 6.5% = 10.5%).
The table below shows current rates for new salaried borrowers:
|Loan Amount||Rate in April 2018||New Rate|
|Below 30 lakhs||8.45%||9.25%|
|Above 30 lakhs||8.60%||9.30%|
Women get a discount of 0.05% on rates on all slabs.
How many more to go?
Reacting to the RBI rate hikes, various bank chiefs hinted that more hikes might not follow. Rajnish Kumar, Chairman of SBI said in a tweet that the RBI decision is a clear desire to “frontload the rate hike cycle”. MD and CEO of Yes Bank Rana Kapoor went a step further saying that he “expected a pause in the remainder of FY 19”. However with rates rising internationally, triggered by the US Fed and inflation in India moving up, there is no strong justification for their assessment.