HDFC hikes home loan rates by up to 20 bps

Housing Development Finance Corp (HDFC), India’s largest home loan provider, has increased its benchmark prime lending rate (PLR), marking a reversal of falling interest rates  in the previous financial year.

For loans below Rs30 lakh, which include priority sector loans, have been increased by 5 basis points, for loans above Rs30 lakh the bank has raised interest rates by up to 20 basis points.
Loans up to Rs30 lakh would now cost 8.45 per cent, up from 8.40 per cent. Women borrowers will get a five-basis-point rebate for all the above slabs. The cost of loans between Rs 30 lakh and Rs75 lakh has been raised to 8.60 per cent from 8.40 per cent.
Loans between Rs30 lakh and Rs75 lakh will now be available at 8.55 per cent for women borrowers and at 8.60 per cent for others, HDFC said in a statement. Loans above Rs75 lakh will cost 8.70 per cent, up from 8.50 per cent.
This is the first time HDFC is raising lending rates since December 2013.
Meanwhile, the benchmark PLR for HDFC had come down from its peak of 16.75 per cent in December 2013 to 16.15 per cent. It will now go up to 16.35 per cent. The increases are effective from 1 April. “This hike reflects the increase in our cost of funds since October,” HDFC stated in its release.
The hike in lending rates may partly be attributed to rising government bond rates. Yields on 10-year government bonds have risen by up to 100 basis points between July 2017 and now. Although yields have come down since February-March, they are still high.
This hike in PLR will help us maintain our margins in the 2.20 per cent to 2.35 per cent range, which has been our historic average for more than ten years,” HDFC CEO Keki Mistry said.
Despite no rate hikes by the Reserve Bank of India, the liquidity squeeze has resulted in several banks hiking interest rates since late 2017. 
It started with the private sector lenders like Axis Bank Ltd., Yes Bank Ltd. and Kotak Mahindra Bank Ltd. hiking their marginal cost of funding-based lending rates. 
That gradually percolated down to all the banks in the system including the largest lender State Bank of India Ltd.