Interest rate hike to raise EMIs on your home loan
Your equated monthly instalment (EMI), on home loan is expected to go up soon. With the Reserve Bank of India hiking key policy rates, banks will soon revise their lending and deposit rates.
RBI hiked interest rates by 25 basis points on Thursday to contain inflation. Apart from new loans, banks will also hike interest on exiting loans.
Fixed deposit rates will also go up along with lending rates. In case of 25 basis point hike in home loan interest rate, for a home loan of Rs 2,000,000 your EMI will shoot up by Rs 300-350 every month depending upon the interest you are paying.
Banks such as SBI and ICICI Bank had revised their lending and deposit rates on January 1, 2011. Other banks also revised rates in the recent past. IDBI increased interest on home loans from 9 % to 9.5 % on loans up to Rs 2,000,000 for a period of 20 years. HDFC increased floating rate interest from 9.25 % to 9.5 % for housing loans of Rs 3,000,000 for a period of 20 years. At present, most banks are charging interest between 9-9.5 % on home loans.
Interest rates on home loans have been on an upward swing for some time now. After the second quarter review of money policy in November 2010, most banks hiked interest rates by 0.25-1 per cent.
However, by when will the banks pass on the hike to customers is not clear yet. The timing of the hike will vary from bank to bank. “There is clearly an upward bias in interest rate. RBI has asked banks to reduce credit-deposit growth gap. But by when and how much will the rate hike will be decided by market forces,” said KR Kamath, chairman and managing director, Punjab National Bank.
“There is definitely an upward bias. But the hike may not be immediate,” said MD Mallya, chairman and managing director, Bank of Baroda.
Processing your request, Please wait....
