Home loan interest rates are going up in the current scenario and there are expectations of another hike in the policy rates by the Reserve Bank of India (RBI) when its bi-monthly monetary policy review takes place on the 5th of October, 2018. This may be the third such hike in succession and may lead to another round of EMI increases as well. The previous two reviews had the RBI increasing the repo rate by 25 basis points each. SBI has already increased its MCLR by 5 basis points with effect from the 1st of October, 2018. PNB (Punjab National Bank), ICICI Bank and Housing Development Finance Corporation (HDFC) have also hiked their MCLR along with retail prime lending rates by 5-10 basis points.
The MCLR is the benchmark lending rate and retail prime lending rate is the one used by NBFCs. The 1 year MCLR at SBI is now 8.5% as compared to 8.45% previously. Home loans are now offered at 8.70-8.95% with female borrowers getting a rebate of 5 basis points. Loans up to Rs. 30 lakh come at 8.70% with loans of bigger ticket sizes being offered at 8.85% and 8.95% for all loans above Rs. 70 lakh. Around a year back, the 1-year MCLR at SBI was 7.95% and this has gone up rapidly.
ICICI Bank has increased its 6-month MCLR to 8.60% from 8.50% earlier and the 1-year MCLR now stands at 8.65% as compared to 8.55% previously. There is a spread charged by the bank ranging between 30 basis points and 90 basis points based on factors like the type of borrower, type of loan and loan amount. Experts feel that a hike of another 25 basis points may be implemented by the RBI as part of its policy for October 2018. Some feel that two more rounds of hikes in rates may be on the anvil since the RBI will attempt to boost the value of the rupee which closed at an abysmal 72.91 to the dollar on the 1st of October, 2018.
As a result, home loan EMIs may in fact increase rapidly according to reports although the impact will not be felt by those immediately who have reset clauses after a few months.