HDFC hikes retail prime lending rate on housing loans by 5 bps

HDFC's adjustable-rate home loans for customers with a credit score of above 750 will now be 6.75% versus 6.70% earlier

Mortgage financier Housing Development and Finance Corporation (HDFC) on Sunday increased its retail prime lending rate (RPLR), on which its adjustable-rate home loans are benchmarked, by 5 basis points, with effect from May 1, 2022. 

This comes after many large banks, including State Bank of India (SBI) increased their marginal cost of funds-based lending rate (MCLR) by 5-10 basis points last month. 

Consequently, HDFC’s adjustable-rate home loans for customers with a credit score of above 750 will now be 6.75 per cent versus 6.70 per cent earlier. 

For loans of up to Rs 30 lakh, customers would be charged an interest rate of 6.85 per cent. Loans ranging between Rs 30-75 lakh will have an interest rate of 7.10, and those above Rs 75 lakh will have an interest rate of 7.20 per cent. For women customers in all segments, the interest rate is 5 basis points lower.

Adjustable-rate home loan (ARHL) is also known as a floating or a variable rate loan. The interest rate in an ARHL is linked to HDFC’s benchmark rate i.e, RPLR, and any movement in HDFC’s RPLR may effectuate a change in the applicable interest rates.

Last month, SBI increased its MCLR by 10 basis points, with effect from April 15, across all tenors (100 bps = 1 percentage point). The one-year MCLR has been revised to 7.1 per cent while two- and three-year MCLRs have been raised to 7.3 per cent and 7.4 per cent, respectively.

The MCLR is a benchmark interest rate, which is the minimum rate at which banks are allowed to lend. Most loans are linked to the one-year MCLR.

Further, Axis Bank, the third-largest private-sector lender in the country, and Kotak Mahindra Bank hiked their MCLR by 5 basis points while Kotak Mahindra Bank, increased its one-year MCLR by 5 bps to 7.4 per cent, from April 16. Bank of Baroda, the public-sector lender, has also increased its MCLR by 5 basis points, with effect from April 12.

The increase in lending rates comes after the Reserve Bank of India’s hawkish stance in the recently concluded monetary policy meeting last month as it turned its focus to tackle inflation from supporting growth.

Due to the ultra-accommodative monetary policy stance and excess liquidity in the system for the last two years, interest rates are at an all-time low with many lenders offering mortgage loans as low as 6.5 per cent.