HDFC, for the first time since December 2013, has bumped up its benchmark prime lending rate. This will make home loans more costly has the interest rates will increase.
HDFC, Housing Development Finance Corporation, decided to introduce the hike to reflect the increase in cost of funds since October. For the period of July 2017 to April 2018, 10-year government bond yields have increased by 100 basis points. Though these yields have seen a decrease since February-March, they still remain in quite a high range.
Home loans above Rs.30 lakhs will see an increase in interest rates by up to 20 basis points. For loans that fall below Rs.30 lakh, including priority sector loans, the interest rate will be upped by 5 basis points. Once converted, one basis point equals 0.01%, therefore interest rates can be increased by up to 0.20%.
The cost of loans above Rs.30 lakh has been bumped up from 8.40% to 8.45%. The cost of loans that range between Rs.30 lakh up to Rs.75 lakh has been increased from 8.40% to 8.60%. Loans above Rs.75 lakh will now cost 8.70%, a 0.20% increase from the previous 8.50%.
For all the above slabs, women borrowers are entitled to a rebate of 5 basis points, or 0.05%.
In December 2013, HDFC had reduced its peak PLR of 16.75% to 16.15%. This will now stand at 16.35% and will come into effect from 1 April 2018. The surge in PLR will help HDFC maintain its margins within a range of 2.20% to 2.35%. Keki Mistry, HDFC CEO, stated that this range has been HDFC’s historic average for more than 10 years.
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