Your home loan rates may have just witnessed another hike and the banks might have increased the tenure of your loan, which is their first way to transfer the rate hike to customers. Pockets to pinch
The lenders have increased the base rate for new customers and the benchmark prime lending rate (BPLR) to which loan rates are tied for existing customers by around 0.5 percentage points.
While borrowing is tougher for the banks after the Reserve Bank's squeeze on rates in September, savers can rejoice. Fixed deposits will now fetch more as the banks have also increased their reference rates.
So, if your bank raises its home loan rate by 0.5 percentage point, say from 9 per cent to 9.5 per cent after 12 months of repayment on a 15-year loan, you would have to pay 11 more equated monthly installments (EMIs).
While ICICI Bank raised its base rate (applicable to customers beginning July 2010) and Floating Reference Rate (for old customers) on Tuesday, Indian Bank and Federal Bank too raised their rates on Wednesday.
“The hike in BPLR and base rate will lead to rise in the lending rates in the same proportion for customers based on either of the reference rates,” said PR Kalyanaraman, executive director, Federal Bank.
“All rates linked with base rate will go up in the same proportion,” said a senior official at Bank of India.