HDFC hikes home loan rates; sees them coming down later

The Housing Development and Finance Corporation (HDFC), India's country's largest home finance company, today announced a hike its home loan rates by 10 basis points (bps) with effect from 1 December.

The interest rate on home loans of up to Rs 30 lakh will now be 10.5 per cent, while for loans from Rs30 lakh to Rs75 lakh, the rate will be 10.75 per cent.

Following the hike, the lender's retail prime lending rate now stands at 16.75 per cent.

HFDC had last hiked its rates on 24 August, by a similar amount.

Keki Mistry, vice-chairman and chief executive officer of HDFC , said in an interview with CNBC-TV18 that the 10 bps rise in interest rate comes on the back of cost of fund adjustment.

However, Mistry said he sees house loan rates going down later this year, when food prices will see a substantial decline owing to a good monsoon.

The Reserve Bank of India (RBI) had hiked its repo rate – a key policy rate at which the central bank lends to commercial banks - by 25 bps in both September and October. Following the October rate hike by RBI, State Bank of India and HDFC Bank had raised their base rates - the benchmark lending rate to which all loan rates are linked. Both SBI's and HDFC Bank's base rates are now 10 per cent.

Since HDFC depends on borrowed funds that are largely from banks, any rate revision by the banks has a direct impact on its cost of funds.