HDFC Increases Retail Prime Rate Effective Today; Home loan interest rates will rise


Will home loan EMIs increase? Following the Reserve Bank of India’s policy rate of 50 basis points, housing finance provider Housing Development and Finance Corporation (HDFC) on Monday announced a 25 basis point increase in the retail prime rate (RPLR) on home loans, starting Tuesday, August 9. .

“HDFC is increasing its Retail Prime Lending Rate (RPLR) on home loans, on which its adjustable rate home loans (ARHL) are benchmarked, by 25 basis points, effective August 9, 2022,” the mortgage lender said. in a press release. .

What does an RPLR hike mean?

The Retail Prime Lending Rate is the rate at which housing finance companies lend to their customers based on their creditworthiness. When lenders make their loans to customers, the RPLR is considered the benchmark against these rates. Thus, an increase in the RPLR will lead to an increase in EMIs paid by home borrowers.

Sujay Das, Chief Risk Officer, Freo, said: “The increase in repo rates by the RBI will in turn increase the interest rates of different products like home loans etc. This will in turn increase the burden of IME for borrowers. Therefore, borrowers will feel a pinch in their pockets as they pay more EMI. On the other hand, it can reduce aggregate gross demand because borrowers can spend less on other goods and services. This will lower inflation and prices in the overall economy, which could benefit borrowers when prices fall for other goods and services.

The announcement comes about a week after HDFC raised the RPLR by 25 basis points, effective August 1. The policy rate has been raised six times since May this year. It was increased cumulatively by 140 basis points. On June 09, the lender increased the RPLR by 50 basis points. Earlier, on June 1, it raised the same by 5 basis points. In May, HDFC raised the rate twice. On May 2, it raised the rate by 5 basis points and on May 9, mortgage rates were raised by 30 basis points.

Yesterday, HDFC Bank also announced an increase in the marginal cost of funds-based lending rate (MCLR) across all loan terms by 5 to 10 basis points, effective August 8, 2022.

Banks and NBFCs are expected to aggressively raise their lending rates as the Reserve Bank of India (RBI) has raised the repo rate since May in a bid to keep inflation under control.

Last week, the RBI MPC raised the repo rate by 50 basis points to 5.4%, its third consecutive rate hike since May, on inflationary concerns, which have been under pressure since the war ended. broke out in Europe in February.

The MPC has increased its repo rate by 140 basis points cumulatively since it began the monetary tightening process, which has been above the RBI’s upper tolerance limit for some time now.

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