Interest rates on home loans into double digits

The Housing Development Finance Company (HDFC) has increased the interest rates it charges on floating-rate home loans by 25 basis points or a quarter of a per cent with immediate effect.

Rival State Bank of India (SBI), however, said it doesn’t plan to raise rates. “We have increased our base rate from 7.60% to 8% and we effected a 25 basis points increase in our prime lending rate before the monetary policy review last week. Hence, no further immediate hike in the lending rates is expected,” said SS Ranjan, chief financial officer, SBI.

The Reserve Bank of India had raised its policy rates — called the repo and the reverse repo — by 25 basis points on January 25, with inflation staying stickily high.

Loans from HDFC up to Rs30 lakh will now be charged at 9.75% per annum, just shy of double digits. The average home loan sought from HDFC is for Rs18.5 lakh approximately now, a company spokesperson said.

HDFC’s loan rates touched double digits in December last when it increased its prime lending rate by 75 basis points.This took loans in the Rs75 lakh and more bracket (which is what most two-bedroom houses in Mumbai cost these days) to 10%.

From today, such loans will be charged 10.25% interest rate.
Loans in the popular Rs30-75 lakh range will be levied 10%, the first time it has touched double digits since 2007-08, the spokesperson said.

SBI has been successfully weaning away clients from pureplay mortgage companies such as HDFC by offering what are called ‘teaser’ loans where the home buyer pays 8%-9% interest rate in the first few years of the loan and prevailing floating rates of interest thereafter.