Double digit loan rates to make home less sweet
Customers with floating rate of home loans have started facing the heat as the interest on home loans goes up by 50-75 basis points. Most banks have informed their customers about revision in the interest rates. Interest rate on home loans is now at minimum 10 %, with most banks increasing rates. Most banks are charging 10-10.5 % interest on home loans for loan below Rs 25 lakh. Interest rate is high on high value home loans due to higher provisioning requirement by the Reserve Bank of India (RBI).
One basis point is one hundredth of a percentage.
With hike in interest rate, news loans as well as existing loans have become expensive, as majority of home loans is on floating basis. A hike of 50 basis points will make your EMI (equated monthly installments) go up by Rs 600-650 per month depending on the loan amount and duration of the loan.
Largest lender, State Bank of India (SBI) is now charging 10.25 % interest for home loan up to Rs 30 lakh. SBI is charging 10.50 % on loan above Rs 30 lakh up to Rs 50 lakh and 11 % for home loan above Rs 50 lakh. SBI home loan portfolio is over Rs 85,000 crore
Housing finance company HDFC is also charging 10.25 % on home loans below Rs 25 lakh. Largest private sector bank, ICICI Bank is charging 10 % on home loan up to Rs 25 lakh and 10.50 % on loan above Rs 25 lakh and less than Rs 50 lakh.
Banks such as IDBI, Bank of Baroda, and Bank of India are charging 10.50 % on home loans up to Rs 20 lakh. “Lending rates are expected to go up further. Latest inflation numbers do not give any indication of relief. Inflation is still very high and Reserve Bank’s priority is to control inflation,” said an SBI official.
However, bankers say that despite rate hike, there may not be any significant impact on the demand for home loans. “Demand on home loans is mainly driven by property prices. Interest plays a smaller role. It is one of the fastest growing segments for banks. We’ll have to see if these hike can deter people from taking home loan,” said an official from Bank of Baroda.
Interest rates on loans have been on an upward swing for some time now. After the monetary policy review on May 3, 2011 most banks have hiked interest rates by 50-75 basis points. In the last 10 days after the key policy rate hikes by the Reserve Bank of India , bank raised their base rate and benchmark prime lending rate (BPLR). Base rate (minimum lending rate) of most banks, both public and private sector, is between 9.25-10.5 %.
Interest rates on home loans have gone up by 2 % in the last one year. Analysts are expecting another 50-75 basis points rate hike this calendar year and this will make bank loan more expensive.
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