Home loan EMIs are increasing at SBI, ICICI Bank, HDFC, others will follow. Impact of rising RBI rates

The holiday season kicked off with Navratri, while a long holiday awaits you in the last two weeks of October due to diwali celebrations.

Notably, a rise in the repo rate makes the cost of borrowing higher for lenders. Financial institutions also borrow money from the RBI in times of cash shortages, the repo rate is the interest rate they pay the central bank on their borrowings. In turn, lenders pass on the impact of rate increases to end consumers by raising their benchmark lending rates on home loans, personal loans and car loans, among others. However, the amount of the loan rate hike depends on lender to lender and their fund requirements.

RBI has raised the repo rate by 190 basis points since May this year. The latest 50 basis point hike was on the lines expected to bring multi-year high inflation under control.

Currently, the repo rate under the Liquidity Adjustment Facility (LAF) stands at 5.90%. While the rate of the permanent deposit facility (SDF) is adjusted to 5.65% and the rate of the marginal permanent facility (MSF) and the discount rate to 6.15%.

Although mortgage rates have increased further at some banks and NBFCs, the overall impact of the latest repo rate hike is expected to be gradual in the housing sector. But if RBI continues to aggressively raise the key rate in upcoming policies, consumer sentiment is likely to be dampened.

What impact will rising rates have on home buyers and home loan EMIs?

Ravi Subramanian, MD and CEO of Shriram Housing Finance, said: “The 50 basis point rate hike reflects the RBI’s cautious approach to dealing with the impact of geopolitical tensions and edgy sentiments in global financial markets. . Amid rupee depreciation and inflationary pressures, the RBI opted for a further calibrated withdrawal of monetary easing so that the renewed momentum of economic growth in the post-pandemic phase does not experience a knock-on effect. ‘coaching. Therefore, the rate hike is in line with expectations.

In the housing finance sector, the CEO of Shriram Housing Finance said, “The transmission of rates to borrowers would be in a gradual phase. Given the positive market sentiments in the property sector, robust demand should outweigh rate hikes. Rate hikes from now on, however, could hurt the economic recovery and dampen client confidence.”

According to Atul Monga, Founder and Managing Director of Basic Home Loan, although banks will eventually have to pass on the increased costs to borrowers, the likelihood of this happening during the current holiday season is low. As many Indians make their purchasing decisions at this time of year, financial institutions would not want to stifle the festive spirit by imposing a rate hike too soon. From a homebuyer’s perspective, they should take advantage of these opportunities and take advantage of seasonal discounts and market offers to make their purchases, as interest rates remain below 9% per annum.

Gaurav Chopra, Founder and CEO of IndiaLends, believes such measures will bring attention back to consumer credit profiles and the importance of maintaining healthy credit scores. It is all the more important that consumers continue to service their debt responsibly. If they cannot, they should confer with their respective lending institutions to identify measures to keep EMIs affordable.

“We believe that financially prudent individuals would take advantage of the opportunity to demonstrate good borrowing behavior and attempt to offset some of these increased costs by qualifying for low-interest credit through a strong credit profile. “, added Chopra.

Meanwhile, Atul Goyal, Chief Financial Officer of Brigade Group, expects to see only minimal impact on the real estate sector, and the increase in interest rates for business loans will be marginal. Home loans are usually tied to floating interest rates with longer tenors.

Goyal added: “In most cases, EMIs will remain the same with the term of the loan being adjusted. The economy remains strong and we expect buyer sentiment to be positive. We are currently seeing steady demand of real estate and we anticipate the current momentum to continue increased hiring and wage increases in the IT and ITE sectors.There is also the availability of excess income, the preference for investment being real estate.

Furthermore, Sachin Agrawal, co-founder and CEO of Bizongo, points out that surely RBI’s priority is to reign in record inflation, which is a huge drain on any company’s resources.

Although higher interest rates on loans and credit may lead to a slight decline in aggregate demand, Aggarwal said, “we remain optimistic about the future, for two reasons. First, despite the headwinds macroeconomic and monetary tightening, Indian manufacturing activity is rapidly This indicates strong demand and sales of goods.Secondly, with the steady decline in global commodity prices, input costs are also gradually declining.

Check the latest home loan interest rates from some major lenders

SBI mortgage rate

Since October 1, the SBI has offered a rate of 8.55% on regular home loans to borrowers who have a credit score of 800 or higher. The bank has imposed a rate of 8.75% on borrowers with a score CIBIL of 700-749 and 151 -200. The home loan rate is 8.65% on CIBIL scores of 750-799, 9.05% on scores of 550-649, and 9.55% on credit scores below 500. The bank has imposed a rate of 8.85% each on CIBIL scores between 650-699 and 101-150.

The bank has a concession of 0.05% for female borrowers subject to a minimum EBR i.e. 8.55%.

Prior to the RBI policy, SBI home loan rates ranged from 8.05% to 8.55%.

Home loans ICICI Bank

On its website, the bank stated that the “ICICI Bank External Reference Rate” (I-EBLR) is referenced to the RBI policy repo rate with a markup over the repo rate. I-EBLR is 9.25% papm as of September 30, 2022.”

For salaried borrowers, ICICI Bank offers a rate of 8.60 to 9.35% on home loans up to ₹35 lakh and from ₹35,000,000 ₹75 million. Rates are between 8.6% and 9.45% on the above home loans. ₹75 million.

For independent borrowers, the bank charges between 8.7% and 9.6%.

Previously, the rates were between 8.10% and 9.10%.

HDFC Home Loans

HDFC is increasing its Retail Prime Lending Rate (RPLR) on home loans, on which its adjustable rate home loans (ARHL) are referenced, by 50 basis points, with effect

effective October 1, 2022, in accordance with regulatory filing.

Now, the NBFC offers interest rates between 8.60% and 9.45% for women borrowers, while rates range from 8.65% to 9.50% for other categories.