With the RBI set to announce its monetary policy, there’s a growing belief another hike in home loan rates is on the cards.
Five out of 10 do not see any reason for such a move in the near future.
Mahalakshmi Hariharan
MUMBAI: With the Reserve Bank of India set to announce its monetary policy on January 30, there’s a growing belief that another hike in home loan rates is on the cards.
While high demand for credit may make it more expensive, the greater worry is that inflationary concerns may lead to a rate hike by the Reserve Bank of India, forcing banks to hike their retail lending rates.
Out of the 10 banks polled by DNA Money, five saw no reason for a rate hike in the near term, four predicted a 25-basis point hike in January while one was undecided.
Bankers who didn’t expect a rate hike were of the opinion that home loan rates are already at their peak. The increase in property prices in select regions of Mumbai, Maharashtra and Delhi has also led to some slack in demand, lessening the pressure on banks to provide funds.
“There is enough liquidity in the market and there might not be a rate hike in home loans,” said Rajeev Sabharwal, head of retail assets with ICICI Bank.
Bankers also argue that since home loan rates have already risen thrice this year, a further hike is unlikely. “Though property prices are up and the number of prospective buyers are down, there is still good demand,” said Puneet Chaddha, head, cards and retail assets with HSBC Bank, adding that there might not be a rise in the home loan rates in the immediate future but they likely to go up by 25-50 bps by the end of March due to liquidity pressures.
With demand for home loans remaining high and inflation contributing its share to the central bank’s basket of worries, some bankers expect the home loan rates to inch up by 25 basis points mainly due to a similar lending rate hike by the central bank.
They buttress their opinion by citing the wholesale price inflation, which touched 5.45% last week — the highest in 2006 and just a shade below the central bank’s tolerance levels.
“The RBI needs to monitor inflation carefully as it is growing rapidly and this will force the interest rates to rise. This will, in turn, lead to an increase in the lending rate and prices for home loan rates will rise,” said a banker with a private sector bank, adding that this will make banks cautious to attract more deposits so as to keep in pace with the demand for such credit growth.
This means that people who are already paying high rates will have an added burden to carry. Loan takers usually go in for a floating rate because in fixed rate the premium charged is higher. People have to think twice before taking a housing loan as the rates have touched the ceiling.
“Due to rising home loan rates, people are finding it rather unmanageable to repay the loans,” said Harpreet Singh, business director for wealth management distribution of loans with Centurion Bank of Punjab, adding that there may be a rise in the home loan rate by 25 bps looking at the rise in the property prices.
An official from HDFC Bank was also of the opinion that home loan rates might raise by 25 basis points in January if the RBI hikes rates.
He added that demand for home loans have now corrected to 25% from 30% about a month back.
Out of the 10 banks, one official from Dena Bank was unsure whether home loan rates will be increased or not.
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