Hdfc Bank Mortgage Loan Interest Rate – Why Lenders Are No Longer Offering Fixed Rate Home Loans While home loan rates in India are at near two-decade lows, financial institutions expect rates to come down.
With interest rates at their lowest in 20 years, one would think that opting for a fixed rate home loan would be beneficial. The only problem is that almost no banks or home finance companies offer fixed rate home loan products anymore.
Hdfc Bank Mortgage Loan Interest Rate
Currently, home loan rates for most lenders start at 6.7%. While home loan rates in India are near two-decade lows, financial institutions expect rates to come down. Going forward, rates are likely to rise if bond yields are any indication. A fixed loan rate of around 8-8.5% would be very beneficial for a customer with a repayment period of 15-20 years. Home loan rates in India peaked at over 11% when the interest rate cycle was on the rise.
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State Bank of India (SBI), the country’s largest lender, has home loan rates starting at 6.7% for loan amounts up to Rs 75 lakh. This is the rate that will be offered to the best customers based on credit bureau scores.
Similarly, ICICI Bank also charges 6.7% for loans up to Rs 75. Housing Development Finance Corporation (HDFC) charges 6.7% on all loans irrespective of loan amount. These rates are valid till March 31 as they are part of a special discount scheme.
None of these lenders offer fixed rate loan products. HDFC offers a fixed and variable rate product where the interest rate is fixed for the first two years.
“They know that rates are not going to stay at this level. Rates will go up,” CSB Bank MD and CEO CVR Rajendran said.
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“If they are offering a fixed rate loan, they will be in a loss position going forward. Floating lending rates are linked to the repo rate or some other rate. When the RBI raises the rate, the home loan rates will go up,” Rajendran told DH.
The Reserve Bank of India has cut its key policy rate or repo rate by 250 bps, which is 4%, from February 2019. While the central bank reassured the market with accommodative monetary policy for the time needed to revive growth, bond yields have started to strengthen, with the benchmark 10-year government bond yield around 30% since early February. bps is increasing.
Linking variable-rate retail loans to an external benchmark, which was mandated by the RBI from October 2019, is another reason most banks have stopped offering fixed-rate home loans, bankers said.
Apart from the expectation of rising interest rates, asset liability is another issue that prevents banks from offering fixed rate loans.
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“The normal tenure of a bank deposit is 1 to 3 years, maximum 5 years. So there is an asset-liability mismatch problem. So, offering a fixed rate loan is not a good economy from an ALM perspective,” Gaurav Gupta, Founder & CEO, Myloncare.
Additionally, customers have less preference for fixed rate home loan products as lenders may charge prepayment penalties for such products.
“Regulatory wise, there are refund fees that apply for flat-rate products. Customers have little preference for a fixed rate home loan for a very long period,” said Gupta.
“From a lender’s perspective, interest rates are at 18-19 year lows and home loan rates are a long-term product. So if a bank offers a fixed rate home loan product, it will cost significantly more than a variable rate loan. If the cost of a variable rate loan is 6.7%, chances are that it will be 150-200 bps higher than if one has a fixed rate loan. Then the question is why would the customer go for it,” added Gupta.
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Home loan growth has slowed significantly over the past year due to a fall in income levels due to pandemic-induced lockdowns.
According to RBI data, the year-on-year credit growth of commercial banks stood at 7.7 percent at the end of January, compared to 17.5 percent a year ago. Credit growth in the fiscal year (since January) was 5.9 percent as against 13.5 percent a year ago.
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Why Lenders No Longer Offer Fixed Rate Home Loan
Housing finance provider Housing Development and Finance Corporation (HDFC) on Monday announced an increase in Prime Retail Lending Rate (RPLR) on home loans.
Will Home Loan Increase? Following the Reserve Bank of India’s 50 basis point hike in the key repo rate, housing finance provider Housing Development and Finance Corporation (HDFC) has announced a 25bps hike in the Prime Retail Lending Rate (RPLR) for home loans starting Monday, August 9. has announced .
“HDFC has increased its Home Loan Retail Prime Lending Rate (RPLR), on which its Adjustable Rate Home Loan (ARHL) is priced, by 25 basis points from August 9, 2022”, the mortgage lender said in a statement. .
The retail loan rate is the rate at which home finance companies lend to customers based on their creditworthiness. When lenders extend their loans to customers, the RPLR is benchmarked against those rates. Thus, an increase in RPLR will result in higher EMIs paid by home loan borrowers.
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Sujay Das, Chief Risk Officer, Freo, said, “The increase in repo rates by the RBI will lead to an increase in interest rates on various products such as home loans. This increases the EMI burden on borrowers. Hence, borrowers will feel a pinch in their pockets as they pay more EMIs. On the other hand, it can reduce overall aggregate demand because borrowers can spend less on other goods and services. This will reduce inflation and prices throughout the economy, which can benefit borrowers when prices for other goods and services fall.”
The announcement comes almost a week after HDFC hiked RPLR by 25 bps with effect from August 1. The key lending rate has been hiked six times since May this year. It rose 140 bps cumulatively. On June 9, the lender hiked the RPLR by 50 basis points. Earlier on June 1, it had increased by 5 basis points. In May, HDFC hiked rates twice. On May 2, the interest rate was increased by 5 basis points and on May 9, home loan rates were increased by 30 basis points.
Yesterday, HDFC Bank also announced a 5-10 bps increase in marginal cost of funds lending rate (MCLR) for all loan orders effective August 8, 2022.
Banks and NBFCs are expected to raise their lending rates aggressively as the Reserve Bank of India (RBI) hiked the repo rate in May to control inflation.
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Last week, the RBI MPC raised the repo rate by 50 basis points to 5.4%, the third consecutive rate hike since May, on concerns about inflation, which has been under pressure since the outbreak of war in Europe in February.
The MPC has raised its repo rate cumulatively by 140 basis points since the monetary tightening process began, which has been above the RBI’s upper tolerance limit for quite some time.
A team of writers and reporters decodes broad personal finance terms and simplifies money matters for you. From the latest Initial Public Offerings … Read More HDFC Bank Ltd has cut its lending against securities interest rates by 0.20%, or 20 basis points, effective Tuesday, July 07, 2020. This reduction in interest rate will reduce the cost for people who want to avail of the loan against their securities mortgage.
HDFC Bank Ltd cut its lending against securities interest rates by 0.20 percent, or 20 basis points, effective Tuesday, July 07, 2020.
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HDFC Bank Limited has revised its minimum securities lending rate for securitized mortgage lending from 9.60 percent to 9.40 percent per annum (MCLR-1 year + 1.95%).
HDFC Bank’s loan against securities interest rate is benchmarked or linked to MCLR (marginal cost of funds based lending rate) for one year. HDFC Bank’s current one-year MCLR, called MCLR-1Y, is 7.45 percent per annum as on Tuesday, July 07, 2020.
HDFC Bank Limited’s current interest rate cut will reduce the cost of funds for people who want to borrow against their securities.
HDFC Bank Loan Against Securities Mortgage Interest Rate: 9.40% to 11.25% per annum (interest is charged on balance compounded daily)
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