Home loan rate hike: Beat the rise with balance transfer and prepayment

Shift to a home loan provider offering a lower interest rate; use bonuses, other windfalls to reduce principal outstanding

Borrowers who took large home loans when interest costs were low may have to do a considerable amount of belt-tightening as home loan rates surge upward. Both State Bank of India (SBI) and ICICI Bank have hiked their home loan rates. 

The former has hiked its marginal cost of funds-based lending rate (MCLR) by 20 basis points (bps) from 8.25 to 8.45 per cent. SBI's home loans will now cost 8.10-8.65 per cent (up from 7.90-8.45 per cent earlier). ICICI Bank has hiked both its six-month and one-year MCLR by 15 basis points.

The rise in home loan rates will