HDFC hikes home loan rates by 50 basis points

Housing Development Finance Corp Ltd (HDFC), India's largest private mortgage lender, has raised its retail prime lending rate by 50 basis points (0.5 per cent) to 16.5 per cent with effect from 1 August.

This hike is in line with interest rates in the economy, which have hardened due to the increase in Reserve Bank of India's policy rates by 75 basis points since June 2011, said a HDFC press release.

This effectively means that existing as well as new borrowers will have to pay higher equated monthly instalments (EMIs). Following the revision, the interest rates on floating rate home loans up to Rs30 lakh will be 10.75 per cent; for Rs30-75 lakh loans the rate will be 11 per cent and on loans above Rs75 lakh the rate will be 11.5 per cent, said an HDFC spokesperson in Mumbai.

Since March 2010, the Reserve Bank of India has tightened policy rates 11 times.

The HDFC rate hike comes a week after the RBI unexpectedly raised key policy rates by an unexpectedly high 50 basis points. Since then, a number of banks and lending institutions have raised their rates.

Banks are a large source of funds for the housing finance companies and an increase in their lending rate would push up the cost of funds for the HFCs. Among the larger banks, State Bank of India and ICICI Bank are yet to take a decision on their lending rates.