HDFC hikes retail prime lending rate on housing loans by 25 bps from Aug 9

Following the RBI monetary policy committee’s (MPC) decision to raise the benchmark policy rate, mortgage lender HDFC Ltd has increased its home loan rates by 25 basis points, effective August 9, the firm said in a late-night exchange notification on Monday.

This is the second rate hike the mortgage lender has announced in quick succession. Last week also it had raised its home loan rates by 25 basis points. The mortgage lender has raised its rates by 140 basis points since May this year, thus passing on the entire rate hike done by the six-member MPC to the borrowers.

“HDFC increases its Retail Prime Lending Rate (RPLR) on Housing loans, on which its adjustable-rate home loans (ARHL) are benchmarked, by 25 basis points, with effect from August 9, 2022,” the mortgage lender said in a statement.

The revised rates for new borrowers’ range would range between 8.05 per cent and 8.55 per cent, depending on credit and loan amount.

HDFC has moved from a quarterly reset for individual loans to a monthly reset to reduce the impact of transmission of rate changes. Its net interest income and net interest margin was impacted in Q1 because the interest rate actions by the central bank had an impact on the borrowing cost of the lender without a simultaneous transmission on the asset side.

Last week, the MPC increased the repo rate by 50 basis points to 5.4 per cent, its third successive rate hike since May, owing to inflation concerns and to shield the exchange rate, which has come under pressure since war broke out in Europe in February.

The MPC has raised its repo rate by 140 basis points cumulatively since it started the process of monetary tightening to tame inflation, which has been above the RBI’s upper tolerance limit for quite sometime now.

HDFC Bank, IDFC First Bank, and Canara Bank have raised their marginal cost of funds-based lending rate (MCLR) in response to the rate hike undertaken by the rate setting body. Most lenders, including ICICI Bank, RBL Bank, Bank of Baroda, and Punjab National Bank have already hiked their external benchmark linked loan rates, following the rate hike by the MPC last week.