HDFC raises interest rate by 5 bps; ICICI Bank raises MCLR by 30 bps

As of December 2021, a little over 39% of banking system loans are linked to the external benchmark, shows RBI data

Mortgage lender Housing Development Finance Corporation (HDFC) has raised interest rates on its home loans again, this time by 5 basis points, effective June 1. It had raised rates by 30 basis points last month post the hike in repo rate in an off-cycle meeting by the monetary policy committee (MPC).

“HDFC increases its Retail Prime Lending Rate (RPLR) on Housing loans, on which its Adjustable Rate Home Loans (ARHL) are benchmarked, by 5 basis points, with effect from June 1, 2022”, HDFC said.

Hence, interest rates for new customers have gone up by 35 basis points since May and for existing customers, it has gone up by 40 basis points because the mortgage lender had raised its interest rates by 5 basis points for existing borrowers before the rate hike happened.

With the current 5 basis points increase, loans up to Rs 30 lakh will have an interest rate of 7.15 per cent; loans above Rs 30 lakhs and up to Rs 75 lakhs will have an interest rate of 7.40 per cent; and loans above Rs 75 lakhs will carry an interest rate of 7.50 per cent. For female customers, rates will be 5 basis points lower in every segment. Also, customers with credit scores above 780 will be charged an interest rate of 7.05 per cent.

Meanwhile, the country's second-largest private sector bank, ICICI Bank, has increased its marginal cost of fund-based lending rate (MCLR) by 30 basis points, effective June 1. Consequently, the overnight and one-month MCLR of the bank is at 7.30 per cent; three month MCLR is at 7.35 per cent; six months MCLR at 7.50 per cent; and one-year MCLR at 7.55 per cent.

This comes after the MPC raised the benchmark repo rate to 4.40 per cent in an off-cycle meeting, due to upside risks to inflation, signaling the rate cycle has turned and days of ultra-low interest rates are over. This was the first rate hike in 45 months, since August 2018.

ICICI Bank has raised its external benchmark lending rate by 40 basis points to 8.10 per cent, effective May 4.

As of December 2021, a little over 39 per cent of banking system loans are linked to the external benchmark, shows Reserve Bank of India (RBI) data, with 58.2 per cent of the home loans linked to external benchmarks. And, 53 per cent of loans of the banking system are linked to the marginal cost of funds-based lending rate (MCLR).