Home Business HDFC Hikes Retail Prime Lending Rate From Today; Home Loan Interest Rates to Rise

HDFC Hikes Retail Prime Lending Rate From Today; Home Loan Interest Rates to Rise

HDFC Hikes Retail Prime Lending Rate From Today; Home Loan Interest Rates to Rise


Home Loan EMIs to Increase? After the Reserve Bank of India key policy repo rate by 50 basis points, housing finance provider Housing Development and Finance Corporation (HDFC) on Monday announced 25 bps increase in the retail prime lending rate (RPLR) on housing loans, effective Tuesday, August 9.

“HDFC increases its Retail Prime Lending Rate (RPLR) on Housing loans, on which its adjustable-rate home loans (ARHL) are benchmarked, by 25 basis points, with effect from August 9, 2022,” the mortgage lender said in a statement.

What does an RPLR hike mean?

Retail Prime Lending Rate is the rate at which housing finance companies give loans to their customers on the basis of their creditworthiness. When lenders give out their loans to customers, RPLR is considered the benchmark against those rates. Thus, an increase in RPLR will result in higher EMIs paid by home loan borrowers.

Sujay Das, chief risk officer, Freo, said: “The increase in repo rates by the RBI will, in turn, increase the interest rates for different products like home loans, etc. This in turn increases the EMI burden for borrowers. Therefore, borrowers will feel a pinch in their pockets as they pay more EMI. On the other hand, this may reduce overall gross demand as borrowers may spend less on other goods and services. This will bring down inflation and prices in the overall economy that may benefit borrowers when prices go down for other goods and services.”

The announcement comes around a week after HDFC raised the RPLR by 25 bps, with effect from August 1. The key lending rate have been increased six times since May this year. It has been cumulatively hiked by 140 bps. On June 09, the lender increased the RPLR by 50 basis points. Before that on 1 June, it raised the same by 5 basis points. In the month of May, HDFC hiked the rate twice. On 2 May, it hiked the rate by 5 basis points and on 9 May, the home loan rates were increased by 30 basis points.

Yesterday, HDFC Bank also announced a hike in the marginal cost of funds-based lending rate (MCLR) across all loan tenures by 5-10 bps, with effect from August 8, 2022.

Banks and NBFCs are expected to aggressively raise their lending rates, as the Reserve Bank of India (RBI) has been increasing the repo rate since May in a bid to tame inflation.

Last week, the RBI MPC increased the repo rate by 50 basis points to 5.4 per cent, its third successive rate hike since May, owing to inflation concerns, which has come under pressure since war broke out in Europe in February.

The MPC has raised its repo rate by 140 basis points cumulatively since it started the process of monetary tightening, which has been above the RBI’s upper tolerance limit for quite some time now.

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