The biggest housing finance organization in India, HDFC, has confirmed an increase in its home loan rates for the very first time since 2013 as per reports. The bank has confirmed that home loan rates have increased by up to 20 basis points. The revision in home loan rates comes after the hike in cost of funds as compared to the previous year according to the latest reports.
There will only be a marginal impact on most customers at HDFC. Rates of interest have been hiked by 5 basis points on home loans up to Rs. 30 lakh. This rate now stands at 8.4% as compared to 8.35% earlier for female borrowers. For others in this segment, the new rates will now be 8.45% as compared to 8.40% previously. The average loan size for HDFC in this market segment is approximately Rs. 26 lakh as per reports.
Home loans which are between Rs. 30 lakh and Rs. 75 lakh now come with interest rates of 8.55% and 8.6% for female borrowers and other customers respectively. These loans have seen rates going up by 20 basis points. Home loans above Rs. 75 lakh now have interest rates of 8.65% for female borrowers while others can avail of home loans at 8.7%. This segment has also seen a hike of 20 basis points. As per industry experts, the yields from bonds are already higher by a percentage point as compared to their levels in the previous year. As a result, if a comparison is made between yields on 10-year Government securities then and now, the increase has been close to 1%.
This is being attributed as one of the major reasons behind the hike in interest rates on home loans at HDFC. The increase comes just after the RBI has taken a softer stance with regard to its overall monetary policy. HDFC revises its interest rates on a periodic basis although other banks do make nominal changes to lending rates almost every month through the application of the specific formula tied to the cost of funds. State Bank of India, Punjab National Bank and ICICI Bank had increased MCLR in March, 2018 while Axis Bank had increased its MCLR in January and February, 2018.
HDFC continues to dominate the home loan category in India with the NPA level falling below 1% and a solid portfolio in its kitty. Almost 70% of the home loans at HDFC are disbursed to salaried borrowers. HDFC has also raised a sum of around Rs. 13, 500 crore according to reports and this will be invested in new opportunities and acquisitions relating to real estate projects which are currently stressed and in limbo. HDFC is also reportedly considering the acquisition of a major health insurance entity.