Home loans get costlier; repayment to rise by over 12 pc | business | Hindustan Times
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Home loans get costlier; repayment to rise by over 12 pc

Home loans just got costlier with the lending institutions today announcing a hike in their interest rates by an average of 0.75 per cent.

business Updated: Jul 31, 2008 19:09 IST

Home loans just got costlier with the lending institutions on Thursday announcing a hike in their interest rates by an average of 0.75 per cent -- a move that would increase repayments by a minimum of about Rs 2.5 lakh for a Rs 20-lakh loan.

Consumers would have to fork out over Rs 1,000 more every month as EMI for a loan of Rs 20 lakh, whose repayment is spread over 20 years.

Market leader HDFC on Thursday announced a hike of 0.75 per cent in its retail prime lending rate, on which its adjustable home loans are benchmarked, with effect from August 1.

While a few banks already announced rate hikes on Wednesday, others are expected to soon follow suit.

HDFC said that for new home loan customers, the adjustable rate loans would now be priced at a minimum of 11.75 per cent. Fixed rate remains unchanged at 14 per cent.

On a 11.75 per cent floating rate, the EMI is estimated to work out to around Rs 21,675 per month, up Rs 1,031 from Rs 20,644 at a rate of 11 per cent.

This would result in an overall additional burden of close to Rs 2,50,000 over the 20-year period.

The rates are being revised in the wake of tight monetary measures announced by RBI on Tuesday, when it asked the banks to maintain higher mandatory cash reserves with it and also increased its short-term key lending rates for them.

ICICI Bank also announced a hike of 0.75 per cent in its benchmark advance rate, which would now increase to 17.25 per cent from 16.5 per cent currently.

The hike entails that consumers would have to now fork out over Rs 1,000 more every month as EMI for a loan of Rs 20 lakh, whose repayment is spread over 20 years.

A few banks already announced rate hikes yesterday and others are expected to soon follow suit.

On a 11.75 per cent floating rate, the EMI is estimated to work out to around Rs 21,675 per month, up Rs 1,031 from Rs 20,644 at a rate of 11 per cent.

This would result in an overall additional burden of close to Rs 2,50,000 over the 20-year period.

The rates are being revised in the wake of tight monetary measures announced by RBI on Tuesday, when it asked the banks to maintain higher mandatory cash reserves with it and also increased its short-term key lending rates for them.

Public sector lender Punjab National Bank yesterday announced an increase of up to one per cent in the Prime Lending rate to 14 per cent.

Private sector Axis Bank also hiked its PLR by 0.5 per cent to 15.75 per cent, which would came into effect yesterday, while Jammu & Kashmir Bank hiked its PLR by up to 1 per cent.

As a part of its measures to tighten liquidity in the banking system to counter inflation, the apex bank has hiked the short-term inter-bank lending rates (repo rate) and mandatory cash reserve (CRR) by 0.50 per cent and 0.25 per cent, respectively.

Experts believe that home loans could get costlier again in coming months as RBI is expected to further tighten its monetary policy with additional CRR and repo rate hikes.