HDFC hikes rates by 75 bps
MARCH 08, 2007: The country’s largest
mortgage finance company HDFC has raised rates
by 75 to 100 basis points. While rates for
customers seeking fixed loans have risen by
100 basis points, existing and new borrowers
on floating rates will pay 75 basis points
more.
Meanwhile State Bank of India has said that
it will soon raise interest rates on car and
personal loans. The bank has however decided
to hold rates on home loan rates and rates
on education loans.
HDFC has announced a revised prime lending
rate of 13.5% on its website from March 1
against 12.75% last month. Since floating
rates are benchmarked to the PLR, all borrowers
with floating rate loans will now pay 75 basis
points more. At the same time the institution
has increased interest rates on its fixed
rate loans by 100 basis points from 11% to
12%. This means that a borrower who goes in
for a 20-year Rs 10 lakh fixed rate loan will
end up paying Rs 689 more per month.
Speaking to ET, Keki Mistry, managing director,
said the new rates are effective from the
beginning of this month. He added the rates
reflected the increase in cost of funds of
the institution. Loan agents said that most
of the institutions rates were still lower
than those charged by ICICI Bank which currently
charges 13% for fixed rate loans as against
12% by HDFC. Floating rates are now available
at 10.5% as against 9.5% earlier.
Unlike other lenders, HDFC’s rates
vary according to loan size and not the tenure
of the loan. For instance loans below Rs 10
lakh carry interest at the rate of 10.5% while
loans above Rs 10 lakh carry an interest rate
of 10.25%.
HDFC has seen its cost of funds rise following
the increase in deposit rates by banks.
The institution has raised deposit rates
under a privilege scheme where it offers up
to as much as 9.55% on 30-month bulk deposits
to senior citizens. For other individuals
the rate of return is 9.3%. In the past the
institution has been benchmarking its interest
rates to SBI deposits.
However, now with bank deposits have a tax
advantage as they enjoy exemption from tax
deduction at source for interest up to Rs
10,000 against Rs 5,000 for housing finance
companies. Despite the increase in the cost
of funds, analyst are forecasting a sound
growth for housing finance companies as banks
are going slow on loans.
Bankers feel that the rise in the home loan
rates could temper some of the surging demand
for housing across the country.
Source:India Times
