Bank of India hikes landing rates, here's how it may impact you

The overnight, six-month, and one-year lending rates of the Bank of India have all increased by 5 to 10 basis points. The revised marginal cost of fund-based lending rate (MCLR) will go into effect on Thursday (September 1). The lowest or minimal interest rate below which financial institutions are not permitted to provide loans is known as the MCLR. Due to the MCLR rise, both current and new Bank of India borrowers will have higher EMIs.

The bank's website states that the benchmark 1-year MCLR has been revised upward by 10 basis points (bps) to 7.60 per cent, the six-month MCLR has increased by 10 bps to 7.45 per cent, and the overnight MCLR has now increased by 5 bps to 6.85 per cent.

There is no change to the remaining MCLR periods. Three-month, one-month, and three-year MCLRs all stay at 7.3%, 7.35%, and 7.80%, respectively.

In recent months, banks have increased interest rates on both deposits and loans. The increases follow a tightening of monetary policy by the Reserve Bank of India (RBI) to combat inflation.

The Monetary Policy Committee of the RBI increased the benchmark repo rate by 50 basis points to 5.4% at the beginning of August. After a 50% increase in June and a 40% increase in May, it was the third straight rise.

The country's inflation rate was 7.79% in April, but it decreased to 7.04% in May and 7.01% in June. Consumer inflation decreased even more in July, falling to 6.71 per cent. It is still above the RBI's planned range of 2 to 6%, though.

Interest rates are rising not only from banks but also from non-banks. A 0.5% increase in house loan lending rates was recently announced by LIC Housing Finance and Bajaj Housing Finance.

The lowest rate for applicants who earn a salary or are professionals has increased by 0.50 percentage points at Bajaj Housing Finance and is currently 7.70%. Despite the most recent hike, the company asserts that its lending rates are still competitive with those of the bulk of its rivals.

The current interest rate for loans from Bajaj Housing Finance is 7.70% for candidates who are employed and professionals. Home loans for self-employed borrowers are available with interest rates starting at 7.95% based on fluctuating rates.

New house loan interest rates will now start at 8%, up from 7.50% before, thanks to an increase in LIC Housing Finance's prime lending rate (LHPLR) of 0.50 percentage points.

The RBI's move to increase the repo rate by 0.50 per cent, according to the company's chief executive and managing director Y Viswanatha Gowd, has only created "little volatility" in monthly payments or loan terms. He also expressed optimism that housing demand will continue to be strong.