Pay more for home loans now

HDFC, ICICI Bank increase rates by 50 points, others set to follow suit

Two of the biggest mortgage lenders, Housing Development Finance Corporation (HDFC) and ICICI Bank, today increased home loan rates by half a percentage or 50 basis points across all maturities.

Other banks "" both foreign as well as domestic "" and housing finance companies are expected to follow suit over the next couple of days.

The last time the mortgage rates were raised was in November 2004. At that time also, the rates were increased by 50 basis points. In other words, the home loan rates have gone up by one full percentage point over the last seven months. This is in line with the hike in government bond yields.

Renu S Karnad, HDFC executive director, told Business Standard that the minimum home loan rate for HDFC was now 7.75 per cent. The new rate takes effect from today.

ICICI Bank's Executive Director Chanda Kocchar said the bank's minimum floating rate has gone up to 8 per cent from 7.50 per cent. Its minimum fixed rate is now 9 per cent, up from 8.50 per cent.

HDFC's minimum pure fixed rate has gone up to 9.0 per cent from 8.5 per cent and minimum money market linked rate to 8.50 per cent from 8 per cent. HDFC's PLR has gone up to 10.75 per cent, while ICICI Bank's floating reference rate has increased to 8.75 per cent.

More banks are like to follow suit. Standard Chartered Bank sources said the bank was in the process of reviewing its home loan rates and a decision is likely next week.

HDFC general manager Conrad D'Souza said the 50 basis points hike in lending rates had neutralised the one percentage point increase in borrowing costs over the last one year.

At present ICICI Bank's home loan portfolio is Rs 23,000 crore of which 80 per cent are floating rate loans and the remaining fixed rate loans. The HDFC home loan book is about Rs 36,000 crore.

Since the last rate hike by the housing companies in last November, the government securities yields have touched new highs. Since the reverse repo rate hike in last credit policy in April, the ten-year benchmark yield has come down from highs of 7.10-15 per cent to 6.90 per cent. Last week in fact it had touched 6.78 per cent.

Similarly, the yield on the 91 day treasury bills has gone down from 5.31 per cent to 5.20 per cent at present.